Labour presses ahead with non-dom abolition

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In her first budget held on 30 October, the new Chancellor, Rachel Reeves, confirmed that the government will press ahead with the abolition of the non-dom tax regime.

Draft legislation has been published setting out the detail of the new rules, which will apply from 6 April 2025.

The proposals are broadly in line with those announced by the previous government in March. The information released yesterday brings some clarifications, and significant further detail in relation to the reforms to inheritance tax (IHT).

Income and gains – the FIG regime

A new four-year foreign income and gains (FIG) regime will apply from 6 April 2025. Those who qualify for the FIG regime will benefit from a complete exemption from UK tax on their foreign income and gains, whether or not they remit them to the UK. Anyone wishing to avail themselves of the regime will need to declare their global earnings on a tax return that will need to be submitted to the UK tax authority (HMRC).

Eligibility for the new regime

The four-year FIG regime will be available to anyone in their first four years of UK residence, provided they have not been UK resident in the previous 10 years.

This means that those who are already UK resident will only be eligible for the new regime if they became UK resident on or after 6 April 2022 and were non-UK resident in the preceding 10 tax years. Subject to the residence criteria, the four-year FIG regime will be available to UK citizens and UK domiciliaries.

Trusts

The FIG regime will apply to non-UK resident trusts. Settlors who are within the FIG regime will not be taxed on the foreign income and gains of trusts they have created. Beneficiaries will not be taxed on distributions that are matched with income and gains of the trust while they are eligible for the regime.

Exceptions

Those individuals who are not in the FIG regime will be subject to income tax and capital gains tax (CGT) on their worldwide income and gains. Settlors will generally be taxed on the worldwide income and gains of trusts from which they can benefit. Currently, there are exceptions from the automatic attribution of income and gains for those who have funded overseas companies (including companies owned by non-resident trusts) where the avoidance of UK tax was not a reason for creating the structure. These exceptions – the so-called “motive defences” – will continue to apply although the rules of which the motive defences form part will be subject to government review in the course of 2025.

Transitional rules

There are two transitional rules for individuals who were already UK resident:

  • Temporary Repatriation Facility

The Temporary Repatriation Facility (TRF) will allow those who have previously been taxed on the remittance basis and who have unremitted income and gains to remit them and pay tax at a reduced rate. The TRF will be available for three years from 6 April 2025 (i.e., until 5 April 2028).

The reduced rates will be as follows:

    • 12% in the 2025/2026 and 2026/2027 tax years; and
    • 15% in the 2027/2028 tax year

The TRF will also apply to unremitted income and gains arising in non-UK resident trusts and non-UK resident companies before 6 April 2025, and also income and gains arising within such a structure that has been attributed to them before this date under the UK’s anti-avoidance rules. In addition, the TRF will cover pre-6 April 2025 income and gains within such structures that have not been attributed to the individual to the extent that the income and gains “matches” to benefits received by the individual during the TRF window. However, the TRF will not be available for distributions of post-6 April 2025 income.

  • Capital gains tax rebasing

This will allow current and past remittance basis users to rebase foreign assets to their market value as at 6 April 2017. This could reduce the chargeable gain if an asset is disposed of on or after 6 April 2025 and the individual is not eligible for the FIG regime.

This CGT rebasing will not be available to individuals who are already UK domiciled or deemed UK domiciled, or become so prior to 6 April 2025.

Inheritance tax

From 6 April 2025, a person will be within the scope of IHT once they have become a ‘long-term resident’ of the UK. Domicile will cease to be relevant. An individual will become liable to IHT on their worldwide assets once they have been UK resident for at least 10 out of the immediately preceding 20 tax years. This will be determined based on the existing residence rules – the statutory residence test (SRT) from the 2013/2014 tax year onwards; and the pre-SRT rules for earlier years.

UK situated assets and non-UK situated assets that derive their value from UK residential property will remain within the scope of IHT, regardless of other factors.

The “tail period”

It had previously been proposed that, once within the scope of worldwide IHT, an individual would remain so for 10 years after ceasing UK residence. That will be the case for an individual who has been UK resident for at least 20 years, but the “tail” period will be reduced where the individual has been UK resident for between 10 and 19 years, on a taper basis. For example, an individual who has been UK resident for 13 out of 20 tax years, will only need three years of non-UK residence to fall outside the scope of IHT.

“Excluded property” trusts

Buried in the budget announcements, there was some limited good news for non-doms with existing “excluded property” trusts. Currently, non-doms who settled non-UK assets into trust are protected from IHT on death. The government had announced previously that this protection would be lost. In response to widespread lobbying, the government has decided that excluded property trusts settled before 30 October 2024 should continue to be exempt from IHT on the death of the settlor.

Non-UK situated property held within a discretionary trust will no longer be excluded property where, and for so long as, the settlor is a long-term resident within the scope of IHT. If the settlor loses their long-term residence status, then the trust can reacquire excluded property status and this will trigger an exit charge for IHT. Settlements that currently have a UK domiciled settlor (under current rules) who will not be a long-term resident (under the new rules) on 6 April 2025, will be facing an unexpected exit charge. Many trusts will be in a situation where the settlor is non-domiciled (under current rules) but will be a long-term resident (under the new rules) and will become subject to the ongoing IHT charging regime with periodic and exit charges.

Commentary

The government has placed growth and wealth creation at the centre of its agenda. It has promoted the FIG regime as “internationally competitive”. The assumption seems to be that those who move to the UK to take advantage of the regime will remain beyond the four-year period and accept UK tax on their worldwide assets thereafter.

The appeal of what is (in effect) a four-year tax haven has drawn speculation. The obligation on those availing themselves of the FIG regime to report their global assets to the UK tax authority may add to the doubt.

The government appears to have heard at least part of the message that has been delivered over recent months. Subjecting existing UK resident non-doms to IHT at 40% on assets settled into trust under the current rules has been widely reported as a deal-breaker for those considering their options. While this was a step too far for many non-doms who were waiting for this clarification, it remains to be seen how those who are left will respond.

Next steps

We will be working closely with our clients and contacts to work out what the detail of the changes will mean to them and to their plans going forward.

Key takeaways for UK Private Clients

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Key takeaways for UK Private Clients – 2024 Autumn Budget

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There are some finer details yet to be released, but here is a summary of the key takeaways from the 2024 Autumn Budget:

Capital Gains Tax (CGT)

Rates of CGT – immediate changes

Despite rumours of CGT hikes to bring rates in line with income tax, residential property rates for CGT remain at 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. Non-residential property rates increase from 10% to 18% for basic rate taxpayers, and from 20% to 24% for higher and additional rate taxpayers (including trustees and personal representatives).

Business Asset Disposal Relief – changes from 6th April 2025

The rates for disposals qualifying for Business Asset Disposal Relief will increase from 10% to 14% next April, and from 14% to 18% for disposals after 6th April 2026. See further detail in our briefing here.

Limited Liability Partnership’s (“LLPs”) liquidation – immediate changes

CGT will be triggered on the return of assets to members on the liquidation of an LLP.

Inheritance tax (IHT)

We knew that IHT reliefs were under scrutiny, and there was a lot of speculation about the form any changes would take.

Before going through the changes, it is worth briefly explaining the current position. Broadly speaking, IHT is due on a person’s estate at 40% on the value over and above their IHT nil rate band (NRB) of £325k. It is also possible to claim the residential nil rate band (RNRB) of up to £175k when descendants inherit qualifying residences.

100% relief is available on business and agricultural assets qualifying for Business Property Relief (BPR) or Agricultural Property Relief (APR), with no cap on the value of assets to which the reliefs apply. Those reliefs were designed to ensure that farms and businesses could be kept intact from one generation to the next.

NRB and RNRB thresholds

The existing NRB and RNRB thresholds will be frozen until 2030. (The NRB has not changed since April 2009.)

APR and BPR

From next April, APR will be extended to land managed under an environmental scheme, although the details are yet to be confirmed.

From April 2026, 100% relief will continue to apply to the first £1m of combined APR and BPR assets, with the excess qualifying for 50% relief only. For example, if you own £2m of shares qualifying for BPR, £1m of those shares would attract 100% relief, and the remaining £1m would be subject to IHT of £200k.

There will be a consultation in March 2025 on how the new allowance will affect trusts subject to the so-called relevant property regime (which levies a charge of 6% every ten years on assets held in trust).

Estates will continue to benefit from the NRB, RNRB and other exemptions (e.g. to spouses, charities etc.). However, it has been made clear that if any of the £1m relievable property allowance is not used on death, it cannot (unlike the NRB and RNRB) be transferred to a surviving spouse. Outright gifts will also continue to escape IHT if made at least seven years before death – there had been concerns that Labour would increase the period to ten years.

There is no mention of the uplift on death for CGT purposes, and so it seems that it will continue to apply.

Assets currently qualifying for 50% relief will remain subject to that rate and will not use up any of the £1m allowance, meaning at least that the allowance is not ‘wasted’ on assets qualifying for a lower rate of relief.

Where there is a mixture of assets qualifying for APR and BPR at 100%, the £1m threshold will be divided proportionately. Taking the Government’s example “if there was agricultural property of £3m and business property of £2m, the allowance for the agricultural property and the business property would be £600k and £400k respectively”.

The instalment option can continue to be claimed on APR and BPR assets.

AIM

The rate of BPR on AIM shares will be reduced from 100% to 50%.

Pensions

Currently there is no IHT on unused pensions funds held in discretionary trusts.

From April 2027, IHT relief on pensions will no longer apply, regardless whether or not the unused pension funds are held in a discretionary trust. Pension providers, rather than the deceased’s personal representatives, will be responsible for sending HMRC the funds to pay the IHT on the unused pension.

It appears that recipients of the balance of unused pension funds (after pension providers have paid the IHT) will remain subject to income tax on withdrawals, meaning, in effect, a double tax charge.

IHT return (online filings)

HMRC will introduce a new online digital platform for filing IHT returns and managing payments.

Other

Private schools

As already announced, VAT will be charged on school fees from January 2025. The Government plans to legislate to remove the eligibility of private schools in England to business rates charity relief. It is intended that this will take effect next April.

Interest on late payment of tax

From 6th April 2025, the interest charged by HMRC on unpaid tax liabilities will increase by 1.5% to 4% above the Bank of England’s base rate. This will substantively increase the cost of claiming the instalment option on IHT.

Key takeaways for UK Private Clients

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Tradition abolition – Emma Gillies and Rebecca Anstey write for STEP Journal

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Emma Gillies and Rebecca Anstey on why the proposed abolition of the UK’s non-dom regime will have little impact on many UK resident Americans.

What is the issue?

The UK government has proposed changes to the taxation of non-UK domiciled, UK residents from 6
April 2025.

What does it mean for me?

Individuals will be looking to their advisors for help navigating these changes and those advising US
citizens will need to understand how the new rules affect their clients.

What can I take away?

The interaction between US and UK tax laws means that US citizens residing in or moving to the UK may not be as concerned as others by the changes, but there are still challenges and potential planning opportunities to be aware of.

It will be old news to many that the UK government plans to introduce changes to the tax treatment of non-UK domiciled, UK-resident individuals (so-called ‘non-doms’) with effect from 6 April 2025. Although many non-doms will have concerns about the impact of the new regime, US non-doms should be sheltered from the fallout more than most.

Proposed changes to UK income tax and capital gains tax

Abolition of the remittance basis

Non-doms can currently claim the remittance basis of taxation. Those who do are subject to tax on their UK-source income and capital gains as they arise, but only on non-UK income and gains if and to the extent that they are ‘remitted’ to (broadly, brought to or used in) the UK.

It is proposed that the remittance basis will be abolished and replaced by a new ‘foreign income and gains’ (FIG) regime. Under the FIG regime, those who have not been UK resident in any of the previous ten years will be exempt from tax on their non-UK income and gains during their first four years of residence (regardless of any remittances). Thereafter, they will become subject to tax on their worldwide income and gains as they arise.

In many cases, the loss of access to the remittance basis will not be a major concern to US non-doms.
Unlike most non-doms, US citizens are already exposed to tax (in the US) on their worldwide income and gains as they arise. Fortunately, there is a treaty in place between the UK and the US that is designed to provide relief from double taxation where a liability arises in both countries at the same time. A UK-resident US citizen (with exposure to tax in both countries under domestic rules) may be able to show that they should be treated as tax resident in the US for the purposes of the treaty, at least for the early years of residence when their ties to the US remain strong. In these cases, their exposure to UK tax will be limited to certain types of UK income, with no need to claim the remittance basis on their foreign income and gains.

Where the taxpayer is resident in the UK for the purposes of the treaty, they will generally be exposed to tax at the higher of the two countries’ effective rates on a given item of income or gain. In that scenario, the utility of the remittance basis is generally limited to avoiding the risk of double taxation. This can be helpful where an item of income or gain is treated differently in the UK and the US, and treaty relief is not available. It can also assist in avoiding a higher rate of tax in the UK than is payable in the US; for example, on investment returns from US mutual funds that do not have ‘reporting’ status in the UK, which are taxed at capital gains rates (20 per cent) in the US but income tax rates (45 per cent) in the UK.

For these reasons, it is uncommon for US non-doms to claim the remittance basis beyond the point at which it comes at the cost of an annual charge (i.e., from the beginning of the eighth consecutive tax year of residence). Before that, it can be convenient to claim the remittance basis from a reporting perspective. However, using the remittance basis to defer UK tax is generally not wise for US citizens, because a mismatch in the timing of the UK and US liabilities can often cause a loss of treaty relief, resulting (ironically) in double taxation. It should only really be used where the taxpayer is confident that their foreign income and gains will never be remitted to the UK.

Removal of ‘protected settlement’ status for ‘settlor-interested’ trusts

Under current rules, where a non-dom settles assets into a non-UK-resident trust, the trust’s non-UK source income and capital gains are generally sheltered from tax unless and until a UK-resident individual receives a benefit from the trust, at which point a liability may be triggered. It looks as though the protected’ status of these trusts will no longer be available under the new regime. Instead, where the UK-resident settlor retains an interest in the trust (within the relevant statutory definitions) it is proposed that the trust’s worldwide income and gains will be treated as arising to the settlor, and will be taxed accordingly.

Again, this change will be of less concern to many US settlors, who will have deliberately put their trusts outside the ‘protected settlement’ regime, having been advised to do so on the basis of double taxation risks. These arise because most lifetime trusts settled by US citizens will be grantor trusts for US income tax purposes, meaning the income and gains of the trust are taxed on the settlor as they arise. The resulting mismatch in the timing of the tax liability (immediate in the US versus deferred in the UK) and, potentially, the identity of the taxpayer (settlor in the US versus beneficiary in the UK) will often cause a loss of treaty relief. By contrast, maximum relief should be available if the income and gains are taxed on the settlor in both the UK and the US as they arise.

Changes to UK IHT

Under current rules, non-doms who are not deemed domiciled in the UK (because they have not been resident in 15 or more of the past 20 tax years) are only subject to UK inheritance tax (IHT) on UK assets. Under the new regime, domicile will no longer be relevant when assessing IHT. Instead, a person will become exposed to IHT on worldwide assets after ten years’ tax residence in the UK.

The deemed domicile ‘tail’

Currently, where a non-dom becomes deemed domiciled, they
will continue to be deemed domiciled for IHT purposes for a
further four tax years after ceasing UK residence. Under the new
regime, it is proposed that this IHT ‘tail’ will be extended to ten
years.

Thanks to the US-UK Estate and Gift Tax Convention (the Treaty), US citizens who leave the UK to return to the US will lose this ‘tail’ much sooner than other non-doms, provided they can show they are US resident for the purposes of the Treaty (and they are not UK citizens). In that scenario, the US will have exclusive taxing rights over the estate, save for UK immovable property or business property of a permanent establishment (BPPE).

Excluded property trusts

Until now, assets transferred into trust by non-doms (including US citizens) who are not yet deemed domiciled are excluded from IHT indefinitely (hence the term, ‘excluded property trusts’).

The government has announced that trust assets will no longer be excluded from IHT. However, some US citizens may be able to rely on the Treaty to achieve the same result. The Treaty provides that no IHT is due on trust assets (other than UK real estate and BPPE) settled by someone who was domiciled in the US and not a UK citizen. If the treaty continues to apply in the same way under the new regime (with UK domicile interpreted to mean ten years’ UK tax residence), assets settled into trust by US citizens who are not UK citizens and have not yet spent ten years in the UK may be protected from IHT beyond the ten-year threshold.

Impact on advice

  • US non-doms who currently make use of the remittance basis should review their financial affair with their advisors, with the Treaty in mind.
  • US citizens moving to the UK for the first time will have four tax years to tailor their investments to account for UK tax considerations. Pre-arrival advice will still be required to avoid tripping up on UK rules affecting existing trusts, business interests and reporting obligations.
  • UK-resident US citizens approaching the new ten-year threshold for worldwide IHT exposure may still consider trust planning to protect their non-UK assets from tax. Alternatives to cover include lifetime giving, structuring wills to defer IHT until the second death of a married couple, investing in relievable assets and/or taking out life insurance to cover the bill.

Tradition abolition, Emma Gillies and Rebecca Anstey, STEP Journal (Vol32, Iss5)  

The Art of The Family Office: Effective Oversight, James Brockhurst and Claris Bell write for the IFC

Abstract Building

In the evolving landscape of private wealth, the role of the family office has never been more critical. But what sets the most successful family offices apart? Private Client partner, James Brockhurst and trainee Claris Bell, share their insights in an article for the IFC Review.

Key takeaways from the article include:

  • The Importance of Governance: Discover how well-defined governance structures provide the foundation for a family office, enabling clear decision-making and alignment with family values.
  • Strategic Oversight: Understand how proactive and strategic oversight can transform a family office into a thriving organisation that adapts to changing economic climates while staying true to its core objectives.
  • Balancing Tradition and Innovation: Explore the delicate balance between preserving family legacy and embracing innovation to foster long-term growth.

Read the full article here on IFC Review to learn more about the evolution of Family Offices.

The holding pattern for non-doms – interim update but full details yet to come

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On Monday 29 July, the government published an update on its plans for the UK’s non-dom regime.

In a few areas, the latest proposals expand on those set out by the previous government on 6 March. For most of the detail, we will need to wait until the budget, which will be published on 30 October. While that is later than expected, it will buy the government time to follow through with its pledge to consult with stakeholders.

Income and gains – the FIG regime

The government has confirmed that it will press ahead with the four-year foreign income and gains (“FIG“) regime. This will be residence-based, with the concept of “domicile” being removed for tax purposes.

The remittance basis, whereby UK residents who are not UK domiciled are not taxed on foreign income and gains unless they are “remitted” to the UK, will be abolished from 6 April 2025.

Under the FIG regime, individuals who have not been UK tax resident in any of the last 10 tax years will be exempt from tax on their foreign income and gains in their first four years of UK tax residence, regardless of any remittances.

The previous government had stated that foreign income and gains arising in non-UK resident trusts (and distributions from those trusts) would also be tax-free during the four-year period. The latest paper is silent on this, suggesting that this part of the policy will be retained.

As announced before, anyone who is not (or ceases to be) eligible for the FIG regime, will be subject to income tax and capital gains tax (“CGT“) on their worldwide income and gains. Outside of the FIG regime, the income and gains of “settlor-interested” trusts will be taxed on settlors.

Transitional rules

The previous proposals included transitional rules for individuals who were already UK resident. Here, there are some changes:

  • Reduced rate of tax on foreign income earned in 2025/2026 – Originally, it was proposed that existing remittance basis users who did not qualify for the FIG regime on 6 April 2025 would only pay income tax on 50% of their foreign income in the 2025/2026 tax year. This relief will not be introduced.

  • Temporary Repatriation Facility – The Temporary Repatriation Facility (“the TRF“) will go ahead. This will allow those who have previously been taxed on the remittance basis and who have unremitted income and gains to remit them and pay tax at a reduced rate.
    The TRF was originally intended to be available for a two-year window from 6 April 2025 to 5 April 2027, with a reduced rate of 12%. In the latest paper, it is stated that “the rate and the length of time that the TRF will be available will be set to make use as attractive as possible.” It is, therefore, possible that we could see a lower rate or a longer period to encourage more inward investment.
    The policy paper states that the government is “exploring ways to expand the scope of the TRF, including to stockpiled income and gains within overseas structures”. This is new, as the proposals previously stated that the TRF would not be available for income and gains in trusts.
    Further details on the TRF will be set out in the October budget.

  • Capital gains tax rebasing – The proposed rebasing for CGT purposes of personally held assets is being kept. This will allow current and past remittance basis users to rebase foreign assets to their value on a specific date. This could reduce the chargeable gain if an asset is disposed of on or after 6 April 2025 and the individual is not eligible for the FIG regime.
    Originally, the rebasing date was 5 April 2019. It is now stated that the date will be set in the October budget.

Inheritance tax

As was announced in March, the abolition of the concept of domicile will also apply to UK inheritance tax (“IHT“) – again, to be replaced with a residence-based system.

This change is now due to take effect from 6 April 2025, which is sooner than might have been expected. The previous government had intended to consult on the details. The new government has stated that it will engage further with stakeholders, but does not intend to carry out a formal consultation.

It is envisaged that, from 6 April 2025:

  • An individual will become liable to IHT on their worldwide assets once they have been UK resident for 10 years. It is not clear whether these 10 years must be consecutive or cumulative over a longer period.

  • Once within the scope of IHT, individuals will remain so for 10 years after ceasing UK residence.

  • The residence status of a settlor will dictate whether non-UK assets within a trust are subject to IHT. It appears that residence will be determined at the time of a “chargeable event”. This would include the transfer of assets into trust, each 10-year anniversary of the trust, and a distribution of trust assets. It would also include the death of a settlor who could benefit from the trust.

The last of these changes will end the existing IHT shelter on non-UK assets provided by “excluded property” trusts.

Prior to the general election, the Labour Party had stated that there would be no “grandfathering” of existing excluded property trusts. The latest policy paper states that the government “recognises that trusts will already have been established and structured to reflect the current rules, so is considering how these changes can be introduced in a manner that allows for appropriate adjustment of existing trust arrangements, while ensuring that the treatment of all long-term residents of the UK is the same for IHT purposes.”

The intrigue caused by this elusive statement looks set to continue until further details are provided in the budget.

Planning ahead

The announcements on Monday confirmed the government’s intention to end the non-dom regime and the remittance basis of taxation, which have been features of the UK’s tax system since 1799.

The transitional provisions for the FIG regime, and the suggestion of concessions on the IHT treatment of existing trusts, will give some reassurance to those who have planned in reliance on the existing regime and now need to map out their future.

In each case, the path ahead will require careful consideration once further details are announced on 30 October 2024. In the meantime preparatory steps can be taken so that planning can proceed as soon as possible following the budget and ahead of 6 April 2025. Please contact the Forsters Private Client team to find out we can help.


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Xavier Nicholas
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The future of the UK’s non-dom regime under the Labour Party

With promises of ‘change’ ringing through Westminster and across the nation, Sir Keir Starmer has been appointed the new Prime Minister of the United Kingdom. As had widely been expected, the Labour Party obtained a significant majority in the UK General Election and will have a strong mandate to govern. With a new party in Government, what does the future hold for the UK’s non-dom regime?

Background

The previous Conservative Government announced on 6 March this year that it would seek to abolish the current tax regime for individuals who are UK resident but not UK domiciled in favour of a residency-based system, which would apply from 6 April 2025.

The proposals were that, from 6 April 2025, the remittance basis of taxation, which allows UK resident individuals who are not UK domiciled to pay tax only on foreign income and gains that are “remitted” to the UK, would be abolished and be replaced with a new regime under which those who have been UK resident for at least four years would pay income tax and capital gains tax (“CGT”) on their worldwide income and gains. It was made clear that the new rules would also apply to income and gains arising within trusts, such that the generous trust protections introduced in 2017 would no longer be available to those who have been resident for four years, even if their trusts were set up before 6 April 2025.

For further details of the original Conservative proposals please read our briefing here.

Labour’s plans

Income and gains

No legislation in respect of the proposed reforms to income tax and CGT was put before the previous Parliament, and with that Parliament prorogued on 24 May 2024 (and subsequently dissolved on 30 May 2024), it will be up to the new Parliament to enact legislation to reform or abolish the non-dom regime.

Labour’s General Election manifesto stated that they would “abolish non-dom status once and for all, replacing it with a modern scheme for people genuinely in the country for a short period.” This has been a long-standing, and much mentioned, aim of the Labour Party, but unknown is

(i) the extent to which the new regime will mirror the proposals set out by the previous Conservative Government, (ii) when we might see the detail of Labour’s proposals, and (iii) from what date the new regime would take effect.

Following the March 2024 Budget, Labour expressed broad support for the Conservative proposals, but argued that the proposals still contained a number of “loopholes”, with reference to the transitional reliefs proposed by the Conservatives.

In particular, Labour have indicated that they would eliminate the proposal that non-domiciled individuals already resident in the UK would only be subject to income tax on 50% of their foreign income in the 2025/2026 tax year. Their manifesto refers obliquely to removing the “non-dom discount loophole in 2025/2026”, which seems to indicate their intention to follow-through with the Conservative proposals with fewer restrictions and that they intend for the changes to take effect from 6 April 2025. Whether the changes will remain a legislative priority now that Labour has gained power remains to be seen.

At the same time, however, Labour have also suggested that they recognise the need to encourage UK investment and would consider additional incentives. We could, for example, see an extension or reformulation of the Temporary Repatriation Facility. This is likely to be an area where there will be extensive lobbying, so we will need to wait to see what any draft legislation looks like.

Inheritance tax

On IHT, Labour have indicated that they do not agree that trusts established prior to 6 April 2025 should continue to be sheltered from IHT.

In their manifesto, they stated that they “will end the use of offshore trusts to avoid inheritance tax so that everyone who makes their home here in the UK pays their taxes here.” From this, it would seem that Labour also intend to tie the IHT status of assets held in trusts to the residence status of the settlor or the beneficiaries of a trust.

However, Labour have not commented in detail on the Conservatives’ proposals for a reformed residency based IHT regime, so again we will have to wait for further detail on this front.

Labour were conspicuously silent on IHT generally in their manifesto and prior to the election refused to rule out reform of the regime. It has been suggested that Labour may also seek to restrict certain IHT reliefs not aimed specifically at non-doms, in particular agricultural property relief and business property relief. It has been suggested that there will be a consultation process on the IHT regime generally and the concept of domicile.

What next?

Rachel Reeves, the newly appointed Chancellor of the Exchequer, has said that there will be no “emergency” Budget and that there will not be a Budget before September, and she has stated that she would not deliver a Budget without a formal forecast from the Office of Budget Responsibility, which requires 10 weeks’ notice. Labour’s Annual Conference will take place from 22 to 25 September 2024, so it may be that any Budget is delayed until after this.

It is possible, if Labour decide to substantially mirror the Conservatives’ proposals, that we might see draft legislation prior to a Budget. However, given that there will be a summer recess (albeit there have been suggestions that the recess may be shorter than usual), and that there will be other legislative objectives, it is more likely that draft legislation will coincide with Labour’s first Budget.

It is, therefore, likely that we will need to wait a little longer to see the substantive details of Labour’s proposals.

Whilst we await the details, it is sensible to plan ahead and consider the options available. Please do get in touch with our Private Client team to find out more.  

John FitzGerald
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John FitzGerald

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The key to a successful country home or farm sale – Adam Saunby shares his insights

Adam Saunby joins Matthew Allen and Richard Gadd of Fisher German, on their podcast ‘Fisher German Talks’, to share his insight and expert analysis of the rural property market.

In the podcast, Adam highlights the importance of thorough preparation before properties are marketed. He covers:

  • Pre-sale preparation
  • The importance of site visits
  • The conveyancing process
  • Replies to enquiries
  • Preparing a data room
  • Drafting the contract
  • Holdover for crops and farm machinery auctions
  • Overage and its complexities
  • Key challenges in the process

You can listen to the full episode here.

If you are preparing to sell your country home or farm and would like expert advice on the process, please do give Adam or a member of our Rural Land and Property team a call.

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Alfred Liu speaks to Citywealth on NextGens and bridging the generation gap

Private Client Partner, Alfred Liu, has provided his insight to Citywealth on how families and their advisors can bridge the gap between generations to transfer wealth successfully and harmoniously.

In the article, ‘The nexus of NextGen’, industry professionals discuss the key issues, and potential solutions, for connecting with the next generation of UHNW individuals. Alfred’s key takeaways are as follows:

  1. Generational Differences:
    • Advisers working with multigenerational families must be aware of deeply ingrained generational differences.
    • These differences can lead to intrafamily disputes and disharmony, risking the fragmentation and dissipation of family wealth.
    • Advisers should help families establish common ground, identify potential generational differences, and develop constructive ways to bridge the divide.
  2. Dynamic Wealth Transfer:
    • The “Big Wealth Transfer” should not be treated as a one-off event.
    • Viewing it as a process rather than an isolated event prevents complacency.
    • Strategies and frameworks must adapt to macro issues, geopolitical changes, and evolving circumstances.
    • The planning for wealth transfer should be dynamic, regularly reviewed, and capable of evolution.
  3. Next Gen Considerations:
    • Next Gens (younger generations) have distinct experiences and relationships with wealth compared to their parents or grandparents.
    • They are often more internationally mobile, exposed to diverse cultures, and seek independence.
    • Advisers must be sensitive to these differences and support families in avoiding disputes.

Alfred reminds readers that wealth transfer is a process not a single event, and understanding the psychology of Next Gens is critical during intergenerational transitions.

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Knowing Receipt Claims: Maryam Oghanna writes for Private Client Business Journal

Contentious Trusts and Estates Senior Associate, Maryam Oghanna, has written an article for Private Client Business Journal on knowing receipt claims.

In the article, entitled ‘Knowing Receipt after Byers v Saudi National Bank’, Maryam discusses the law on knowing receipt and the distinction between dishonest assistance and knowing receipt claims in light of the recent Supreme Court Decision in Byers v Saudi National Bank. The Supreme Court held that a knowing receipt claim cannot be made if the claimant’s equitable proprietary interest in the relevant asset has been extinguished at the time of the alleged knowing receipt.

The full article can be read here, behind a paywall.

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Maryam Oghanna and Ashleigh Carr to speak at the Trusts in Litigation Conference 2024

Abstract Building

Contentious Trusts and Estates Senior Associates, Maryam Oghanna and Ashleigh Carr are attending and speaking at the Trusts in Litigation 2024 Conference taking place 21-22 March 2024.

The conference, hosted by the Contentious Trusts Association (ConTrA) and Informa Connect, brings together professionals in the world of contentious trusts to share knowledge and develop networks.

Ashleigh, as the co-chair of ConTrA, will be chairing the conference alongside the founders of ConTrA and her current ConTrA co-chair, James Lister, Partner at Stevens and Bolton.

Maryam will be presenting the session entitled ‘Enforcement across borders’, exploring methods of enforcement for offshore assets and the difficulties arising in pursuing a judgment debtor in multiple jurisdictions. She will be joined by Sebastian Auer, Partner at Gasser Partner; Ami Sweeney, Associate Director at Grant Thornton; and Faye Hall, Partner at FRP Advisory.

Non-dom rules to be replaced with four-year temporary residence regime

Abstract Building

The Chancellor of the Exchequer, Jeremy Hunt, has announced that the government will abolish the current tax regime for individuals who are UK resident but not UK domiciled in favour of a residency-based system, which will apply from 6 April 2025.

The proposed changes are wide-ranging and will affect both individuals currently living in the UK and those planning to move to the UK. The good news is that the 6 April 2025 implementation date gives those who are already UK resident time to take advice and plan before the changes take effect.


Non-Dom Rules Replaced


Summary

From 6 April 2025, the remittance basis of taxation, which allows UK resident individuals who are not UK domiciled to pay tax only on foreign income and gains that are “remitted” to the UK, will be abolished. It will be replaced with a new regime under which those who have been UK resident for at least four years will pay income tax and capital gains tax (“CGT“) on their worldwide income and gains.

Draft legislation has not been published, but the government has made it clear that the new rules will also apply to income and gains arising within trusts. The result is that the generous trust protections introduced in 2017 will no longer be available to those who have been resident for four years, even if their trusts were set up before 6 April 2025.

Four years of residence tax-free

  • Individuals who become UK resident after a period of at least 10 years of non-UK residence will not pay UK income tax or CGT on their foreign income and gains in their first four years of UK residence, even if they bring the income and gains to the UK.
  • This means that individuals who are only temporarily UK resident will be able to spend their foreign income and gains freely in the UK without incurring UK tax – and without the need to navigate the complicated remittance basis rules.
  • Foreign income and gains arising in non-resident trusts, and distributions from those trusts, will also be tax-free during the four year period.

Transitional rules

For those who are already UK resident, there will be several transitional rules.

Pre-6 April 2025 income and gains

  • The remittance rules will continue to apply to unremitted foreign income and gains generated prior to 6 April 2025 on assets held personally. That is, the income and gains will continue to be free of tax provided they are not remitted.
  • This will not be the case for income and gains arising in trusts before 6 April 2025, which will be taxed in full if matched against distributions made on or after 6 April 2025 regardless of whether they are remitted (though distributions made within the first four years of residence won’t be matched or taxed).
  • Those who are already UK resident may need to consider planning in advance of the changes.

Temporary Repatriation Facility

  • A new Temporary Repatriation Facility will be available from 6 April 2025 to 5 April 2027. This will allow those with pre-6 April 2025 unremitted income and gains to remit them and pay tax at a reduced rate of 12%. Again, this will not be available for pre-6 April 2025 income and gains in trusts.

Reduced rate of tax on foreign income earned in 2025/26

  • Existing remittance basis users who will have been UK resident for at least four years on 6 April 2025 will only pay income tax on 50% of their foreign income in the 2025/2026 tax year.

Capital gains tax rebasing

  • Those who have been UK resident for more than four years (whether in 2025/26 or later) will be able to choose to “rebase” any assets held personally on or before 5 April 2019 to their market value on that date, so that only the post-5 April 2019 gain will be subject to CGT on a disposal.

Inheritance tax

The inheritance tax (“IHT“) regime, which is currently based predominantly on domicile, will also move to a residency-based system. The government intends to consult on the details. However, it is proposed that individuals will be subject to IHT on their worldwide assets after they have been UK resident for at least 10 years, and will remain so for 10 years after ceasing residence.

It is envisaged that the current regime will continue to apply to non-UK situated assets settled onto trust by a non-UK domiciled individual prior to 6 April 2025. For trusts established on or after 6 April 2025, chargeability to IHT will depend on whether the individual was within the scope of IHT at the time of funding the trust.

Planning ahead

The remittance basis has been a feature of the UK’s tax system since 1799. With both the government and the main opposition party now committed to its abolition, its future seems all but certain. Hopes that a replacement regime would be the subject of consultation (not just on the detail of the IHT aspects) will be dwindling rapidly. Many will be disappointed that both main political parties have committed to a limited inpatriate regime when compared to those offered by some other countries in Europe.

For those who are already UK resident, however, the transitional provisions that have been announced present opportunities that will deserve careful consideration as further details become available.

Anson Revisited: What does HMRC’s updated guidance mean for UK resident members of US LLCs?

The US and the UK are separated by the vast and tumultuous waters of the Atlantic Ocean. Those with connections to both countries will often find themselves rowing against the tide between two very different and complex regimes. With the right specialist advice, they can navigate the cross-border challenges safely and make the best use of planning opportunities.

Understand the issues, avoid the traps, and discover ways to plan ahead in our Navigating the Atlantic series for US-connected clients.

UK Tax Treatment for Members of US LLCS

In this instalment, we explore the impact of HMRC’s recently updated guidance on the UK tax treatment of US LLCs and why planning ahead is more important than ever to avoid double taxation.


Moving to the UK


Introduction

On 12 December 2023 HMRC published updated guidance (issued in International Manual 180050, see also 161040) on the UK tax treatment of profits arising within a limited liability company (an “LLC”) incorporated in the US. The guidance indicates that taxpayers will face an uphill struggle if they now wish to claim double tax relief on the basis of the decision of the United Kingdom’s Supreme Court in Anson v HMRC [2015] UKSC 44 (“Anson”).

Background

In Anson, the taxpayer (Mr Anson), who was UK resident, was a member of a Delaware incorporated LLC. The profits of the LLC were apportioned between and distributed each quarter to its members. The LLC was classified as a partnership for US tax purposes and was, therefore, transparent for US federal and state tax purposes: Mr Anson (and not the LLC) was liable to US tax on his share of the profits as they arose.

HMRC sought to charge Mr Anson to UK income tax on the profits he received from the LLC (i.e. on the distributions) and argued that the profits that had been taxed in the US were the profits of the LLC and not of Mr Anson. On that basis, they argued that Mr Anson was not entitled to the benefit of the US/UK double tax treaty because the US tax and the UK tax were not payable on the same profits.

The First-tier tribunal (“the FTT”) found in Mr Anson’s favour, finding as fact that under Delaware law the profits of the LLC belonged to the members and not to the LLC. The case ultimately reached the Supreme Court, which also found in favour of Mr Anson by virtue of the FTT’s finding of fact: if Mr Anson’s share of the profits belonged to him under Delaware law, the distribution of his profits to him represented the mechanics by which he received the profits to which he was entitled and did not represent a separate profit source. As both US and UK tax arose on the same profits, Mr Anson was able to benefit from relief under the US/UK double tax treaty.

HMRC’s Initial Guidance Relating to Anson Published On 25 September 2015

Shortly after the Supreme Court’s decision in Anson, HMRC published guidance in which they stated that “HMRC has after careful consideration concluded that the decision is specific to the facts found in the case…Individuals claiming double tax relief and relying on the Anson v HMRC decision will be considered on a case by case basis.”

Perhaps tellingly HMRC also said that “where US LLCs have been treated as companies within a group structure HMRC will continue to treat the US LLCs as companies, and where a US LLC has itself been treated as carrying on a trade or business, HMRC will continue to treat the US LLC as carrying on a trade or business”. HMRC’s guidance reassured the corporate community that group relief would continue to be available where US LLCs were part of the group structure.

Although not particularly helpful, this guidance suggested that HMRC conceded that where the facts of a case and those found in Anson were alike, the profits of an LLC should be treated as belonging to its members such that double taxation relief would be available.

HMRC’s Guidance Published in December 2023

However, it appears from the latest guidance that HMRC has decided to take a more robust approach. In INTM180050 HMRC now state: “Based on HMRC’s understanding of Delaware LLC law (as at 06 December 2023), and contrary to the conclusion reached by the FTT in HMRC v Anson…HMRC continue to believe that the profits of an LLC will generally belong to the LLC in the first instance and that members will generally not be treated as “receiving or entitled to the profits”of an LLC.”

HMRC go on to say that it understands that the LLC law of the other US states is largely the same as that of Delaware so that it would generally not regard the profits of other US LLCs as belonging as they arise to the members.

From HMRC’s perspective it follows that individual members will only be chargeable to UK tax on any dividends or other distributions that they receive from the LLC (a consequence of HMRC continuing to regard LLCs as being ‘opaque’ for UK tax purposes), and that such receipts will be taxed at the dividend rate of income tax (currently up to 39.35%). If the LLC is taxed as a partnership in the US, HMRC warns that in its view no relief is available under the treaty because it believes the same income is not being taxed in both jurisdictions.

Based on HMRC’s 2015 guidance taxpayers with similar facts to Anson were claiming treaty relief but in its new guidance HMRC say that where a taxpayer has claimed such relief, “HMRC will consider opening an enquiry or making a discovery assessment in accordance with its normal riskbased approach.”

Implications of HMRC’s Updated Guidance

For UK resident individuals who are members of US LLCs, the significance of the latest guidance is that HMRC is putting the taxpayer on notice that it disagrees with the FTT’s finding of fact in respect of Delaware law; as this finding underpinned the Supreme Court’s decision that Mr Anson could claim double tax relief, HMRC are now asserting that taxpayers with similar facts to Anson cannot rely on that decision to claim such relief.

Whilst the FTT’s finding in relation to Delaware law is treated as a finding of fact and therefore does not set a binding precedent for future cases, the Supreme Court considered that the FTT was entitled to make its findings about the interaction between Delaware legislation and the LLC’s operating agreement (it is generally understood that the LLC in Anson was not unusual). Further, as HMRC’s revised position is not based on new law but merely disagreement with the decision in Anson, it remains open for taxpayers to continue to file on the basis of Anson (with appropriate disclosure in the tax return).

What Planning Options are there Beyond Relying on Anson?

The latest guidance indicates that HMRC are likely to push back on any attempt by a taxpayer simply to rely on Anson and may intend to re-litigate the point (albeit largely running the same arguments). HMRC may or may not win on any re-run of the Anson litigation. However, unless a taxpayer is determined to fight the point, if possible, we would suggest that it would be more time and cost effective for a taxpayer to structure their affairs so as to avoid the risk of double taxation. For example, to the extent possible, taxpayers could:

  • structure their investments/ business interests through an entity that is treated as being either transparent or opaque in both the US and the UK; or
  • if they are able to do so, claim the remittance basis of taxation and not remit any income from the LLC.

Conclusion

There is a certain policy logic for HMRC’s revised guidance which doubles down on its view that US LLCs should generally be treated as ‘opaque’ (often the desired treatment from a UK corporation tax perspective); HMRC’s position enables it to adopt a more uniform approach that, in practice, does not require it to review the relevant state legislation and an LLC’s operating agreement in every case.

However, it is an unsatisfactory outcome for individual taxpayers, particularly for those who want to receive their distributions in the UK and who justifiably wish to rely on the Supreme Court decision to benefit from treaty relief but do not want to incur the expense of challenging HMRC’s updated view. Taxpayers who want certainty of treatment may have to either accept an unpalatable double tax cost or see if they can structure or restructure their affairs accordingly.

Disclaimer

The members of our US/UK team are admitted to practise in England and Wales and cannot advise on foreign law. Comments made in this article relating to US tax and legal matters reflect the authors’ understanding of the US position, based on experience of advising on US-connected matters. The circumstances of each case vary, and this article should not be relied upon in place of specific legal advice.

This article has also been published in ePrivateClient, which can be found here.

Testing the limits of transparency: Guy Abrahams is quoted in Property Week on land ownership

Private Client Partner, Guy Abrahams, has been quoted in the Property Week article ‘Testing the limits of transparency’.

The article seeks the opinion of industry experts on the transparency of Britain’s property market regarding land ownership. The push for greater transparency is to help target illicit finance and corruption in the property sector.

Guy explains a key issue in identifying property owners is balancing the need for transparency with the right to privacy. On whether the government should enforce the publicity of property-owning trusts, he comments that it would not go far enough to minimise the chance of illicit funds infiltrating the property market.

The full article can be read here.

Please contact Guy to discuss any of the topics raised in this article.

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Forsters’ Private Wealth lawyers recognised in Legal Week’s Private Client Global Elite Directory 2024

12 lawyers from our Private Wealth practice have been recognised in Legal Week’s Private Client Global Elite Directory 2024.

Private Client Global Elite:

Private Client Global Excellence:

The Private Client Global Elite Directory was created with the awareness that referrals and recommendations are the key to the private client sector. To know that someone is an excellent technical practitioner is essential, but it is also integral for the maintenance of client relationships that the advisors you refer to your clients are good personality fits and masters of communication. As such, Private Client Global Elite recognised excellent individuals as chosen by their own peers within the private wealth industry.

The full directory can be viewed here.

Simon Blain to speak at The Practitioner’s Forum on Trusts in Divorce 2024

Family Partner, Simon Blain, has been invited to speak at The Practitioner’s Forum on Trusts in Divorce 2024.

Hosted in London on 15 February, the in-person forum brings together Trust and Family lawyers to discuss the complex issues that can arise from trusts in divorce. It is an opportunity to discover the various perspectives that shape trusts in divorce and gain insight from experienced lawyers on how to navigate these intricacies.

Simon will be joined by Stacey Nevin of Kingsley Napley, Emma Holland of Stewarts and Tom Deely of Howard Kennedy LLP. Their session, ‘Understanding How and When Trusts are Brought into Divorce’ will cover:

  • The trust as an asset
  • Stress testing against divorce
  • The powers of the family court

The full article can be read here.

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Xavier Nicholas recognised as one of the 50 Most Influential in ePrivateclient 2024

Xavier Nicholas, Partner and Head of Private Client, has been named as one of ePrivateclient’s 50 Most Influential in 2024.

The listing identifies the leading practitioners of the private client sector, showcasing 50 of the most talented and highly regarded private client advisors.

Xavier has been recognised for his technical expertise and his ability to advise on the most complex and high-value matters. He was also listed in the 2022 edition.

The full 2024 ranking can be viewed here.

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Hannah Mantle to speak at The 2024 Practitioners’ Forum on Stress Testing Trust Structures

Contentious Trusts and Estates Partner, Hannah Mantle, has been invited to speak at the ThoughtLeaders4 conference ‘The 2024 Practitioners’ Forum on Stress Testing Trust Structures’ on 18 January in London.

The conference will unite contentious and non-contentious private client practitioners to examine the best practice for enhancing the resilience of trust structures and mitigating risks of attack.

Hannah will be joining Hugh Gunson of Charles Russell Speechlys, Helen McGhee of Joseph Hage Aaronson and Christopher S. Cook of Baker McKenzie for a session, entitled ‘Fortifying Trusts Against Tax Authority Attacks’. In the session, the speakers will cover:

  • Changes in tax law that could leave a trust vulnerable
  • Trust and corporate residence issues
  • Mitigating tax implications
  • Implementation of tax advice over time
  • Other commonly encountered tax issues.

You can register to attend the conference here.

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Busting myths when it comes to gifts!

The US and the UK are separated by the vast and tumultuous waters of the Atlantic Ocean. Those with connections to both countries will often find themselves rowing against the tide between two very different and complex regimes.

With the right specialist advice, they can navigate the crossborder challenges safely and make the best use of planning opportunities. Understand the issues, avoid the traps, and discover ways to plan ahead in our Navigating the Atlantic series for US connected clients.

Gifting

In this instalment, we bust some of the common myths when it comes to gifting and compare the tax implications of gifting in the US and the UK.


Moving to the UK


Myth 1: Gifts to my spouse will always pass free of tax

It is a common misconception that gifts to spouses and civil partners are completely exempt from transfer taxes in both jurisdictions. However, such gifts may be taxable where there is a mismatch in the tax status of the donor (the person making the gift) and the donee (the person receiving the gift).

UK

In the UK, there is generally an unlimited exemption from inheritance tax (“IHT”) on gifts between spouses and civil partners. However, where assets pass from a UK domiciled (or deemed domiciled) spouse to a non-UK domiciled spouse, the exemption is limited to just £325,000. Gifts in excess of this will be subject to tax in the same way as gifts made to any other individual.

There is an option for the non-UK domiciled recipient spouse to elect to be treated as domiciled for IHT purposes (in order to access the unlimited exemption) but this would also have the effect of bringing their non-UK assets within the scope of IHT, which may not be desirable. This will need to be considered carefully, on a case-bycase basis.

US

In the US, there is also an unlimited marital deduction from gift and estate tax on transfers to spouses in most cases. However, this will not be available where the donee spouse is not a US citizen. In that scenario, tax-free transfers in lifetime are limited to $175,000 annually (in 2023). In order to access the marital deduction from estate tax on death, assets have to be left to the non-US spouse in a special type of marital trust, known as a “QDOT”.

Myth 2: Gifts to charity will always pass free of tax

UK

In the UK, in order for a gift to charity to qualify for the charitable exemption from IHT, the recipient entity must not only be operating for ‘charitable purposes’ (as defined in UK legislation), but it must also be registered as a charity in a country of the UK, EU or EEA. Critically, this means that a gift to a US charity will not qualify for the exemption, no matter how worthy the charitable cause. Lifetime transfers to non-qualifying charities can trigger immediate IHT charges (as well as charges to UK capital gains tax on assets gifted in specie, as discussed below).

US

While the US imposes equivalent geographical limitations for income tax purposes (i.e. a charitable gift must be made to a US organisation to qualify for relief), this limit does not apply for US estate tax purposes where charitable bequests are made by US citizens and domiciliaries. Non-US citizens/domiciliaries, however, must leave US situs property to a US organisation to qualify for the US estate tax charitable deduction.

Myth 3: Gifts of appreciated assets will not trigger capital gains tax

US

In the US, gratuitous transfers of appreciated assets will not constitute chargeable disposals for US income tax purposes – i.e. any in-built capital gain will not be crystallised on such transfers. Instead, the donor’s base cost in the assets will be “carried over” to the donee and will be used to compute the gains realised on the eventual disposal of the assets by them.

UK

One might assume that the same will be the case in the UK, but that assumption would be incorrect. In the UK, with certain limited exceptions, a gift of an asset will be a chargeable disposal for capital gains tax purposes. If chargeable gains are triggered in the UK but not in the US on the same event, this can give rise to a risk of double taxation because the mismatch in treatment can cause a loss of relief under the US-UK double tax treaty. Advice should be sought on aligning the treatment in both countries to maximise relief.

Myth 4: Gifts will always pass free of tax if I survive for seven years

UK

In the UK, outright lifetime gifts to individuals will generally be subject to the ‘potentially exempt transfer’ (“PET”) regime. This means they will pass out of the donor’s estate free of IHT if the donor survives the gift by seven years or more. If the donor survives the gift by more than three years but less than seven, the gifted sum will be subject to IHT on the donor’s death, but at a reduced rate. The PET regime can be extremely advantageous for individuals who can afford to make substantial lifetime gifts, as there are no limits on the amount that can be given away to the next generation taxfree under this regime.

US

However, those who are subject to US gift and estate tax will be limited in their lifetime giving, as there is no equivalent to the PET regime in the US. Instead, US citizens and domiciliaries are broadly limited to making annual gifts to (any number of) individuals of up to $17,000 (in 2023) and otherwise eating into their lifetime exclusion amount of $12.92 million. Gifts in excess of these amounts are typically subject to immediate US gift tax at a rate of 40%, which is likely to be prohibitive in most cases.

Myth 5: I can make gifts into trust up to the available US gift and estate tax lifetime exclusion amount without incurring tax

US

It is common planning for US citizens and domiciliaries to make substantial lifetime transfers of assets into trust. By doing so, they can potentially remove assets (and any future growth on those assets) from their estates for US estate tax purposes. Provided the value of the assets transferred falls within their lifetime exclusion amount for gift and estate tax, this can be done without triggering tax.

UK

By contrast, in the UK, transfers of assets into trust are immediately subject to IHT (subject to available exemptions or reliefs). IHT is charged at a rate of 20% to the extent that the value of the assets transferred exceeds the donor’s available ‘nil rate band’ of up to £325,000. This IHT charge will be “topped up” to a maximum of 40% in the event that the donor dies within five years of the transfer. For UK domiciled (or deemed domiciled) individuals, this will be relevant to transfers of any assets, worldwide. For non-UK domiciled individuals, this will apply to transfers of UK assets only. Where it is relevant, this IHT charge will generally prohibit lifetime planning using trusts.

Contact us

It is clear that gifting is an area that can cause significant difficulties for individuals with tax connections in the US and the UK. It is extremely important that advice is taken from advisors with an understanding of how the two legal systems interact; ideally before any action is taken.

Disclaimer

The members of our US/UK team are admitted to practise in England and Wales and cannot advise on foreign law. Comments made in this article relating to US tax and legal matters reflect the authors’ understanding of the US position, based on experience of advising on USconnected matters. The circumstances of each case vary, and this article should not be relied upon in place of specific legal advice.

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To Advise or Not to Advise? Timothy Evans and Olivia Longrigg write for Financial Remedies Journal

Family Associates, Timothy Evans and Olivia Longrigg, have written a piece for the Financial Remedies Journal providing commentary following the case of Lewis v Cunningtons Solicitors [2023] EWHC 822 (KB) which concerned a professional negligence claim against the claimant’s matrimonial solicitors.

In particular, the claim concerned a failure to advise in respect of a pension, which was the primary asset of value in the matrimonial proceedings.

The case provides guidance on the use of limited retainers and waiver letters, and also restates the jurisprudence surrounding a solicitor’s duty to advise. The article also raises questions as to procedural best practice in respect of pensions at an early stage of the retainer.

Timothy and Olivia highlight that:

  • Cunningtons had enough knowledge (absent full and frank disclosure) to know of the importance of and therefore advise upon the pension asset;
  • A public sector defined benefit scheme is one which should be a red flag for practitioners, as the attributable CE value is likely to be much less than the pension’s true worth;
  • Pensions remain one of the main potential sources of negligence litigation against family law solicitors. They are often an overlooked part of the divorce process, in part because of their complexity, in part because some clients do not want to engage with them and, sometimes, because in high net worth cases the pensions are dwarfed by other assets.

Read more here.

“Family Wars – lessons to be learned from conflicts” The Royal Gazette covers Nick Jacob’s STEP seminar

Abstract Real Estate

Private Client Partner, Nick Jacob, was invited to present a session at the recent STEP Bermuda Conference 2023. His session, entitled ‘Family Wars – lessons to be learned from conflicts’ has since been covered in an article by The Royal Gazette.

“No matter how big your business empire, or how tight your grip on it, you need a will and a succession plan. This was the sage advice from Nick Jacob” writes the editor.

The article highlights Nick’s top tips to avoid family conflict:

  • Facing up to potential conflict issues before they become real conflicts is absolutely critical.
  • Getting everybody in the family to buy in to the structuring and to understand why it has been set up is important.
  • Trust professionals must ensure that the structures they set up are not too complicated to understand.
  • Advisors need to think about whether what we are advising is right for the client. Are the structures going to work for that family, and are they dynamic enough to change in the future?

The full article can be read here.

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Parliamentary Launch of Resolution’s Vision for Family Justice: A Focus on Cohabitation Reform

On Monday 27 November, Resolution hosted the launch of their Vision for Family Justice in Parliament.

The Vision, which sets out Resolution’s five key recommendations to improve family law/the family justice system, will provide a blueprint for Resolution’s campaigning activity ahead of the next general election and beyond. The Parliamentary launch focused on Resolution’s primary aspiration: to reform the law on cohabitation.

Jo Edwards, Chair of Resolution’s Family Law Reform Committee and Head of Family at Forsters, spoke at the launch about Resolution’s objective to provide a safety net for cohabiting couples on relationship breakdown or the death of their partner. Resolution’s polling ahead of its annual Awareness Week, which ran from 27 November to 1 December, found that 74% of cohabitees agree that ‘the current laws surrounding cohabitation are unfit for today’s modern society’. It also showed that 59% of the population believe cohabiting couples should have better legal protection (with a further 13% being undecided, rather than opposed).

The dramatic increase in cohabiting couples in the UK (over a 25-year period to 2021 there was a 144% increase, and cohabiting couples now represent around 1 in 5 families), makes unmarried couples the fastest growing relationship type in the UK. It was found in Resolution’s polling that 83% of the population expect these numbers to increase in the next decade. This huge growth in the numbers, coupled with people believing they are automatically protected as common law spouses (as Resolution’s polling showed), makes the lack of legal protection for cohabiting couples particularly concerning.

At the Parliamentary launch, both Grant Cameron (current Resolution National Chair) and Jo Edwards emphasised the need for cohabitation reform and the risk of England and Wales remaining a “curious outlier” if there is failure to implement change. She called for Parliamentarians and officials to work with Resolution to change the law on cohabitation to fit the needs of modern families.

Emily Thornberry, Shadow Attorney General, followed Jo Edwards in championing the need for cohabitation reform, acknowledging that the law as it stands is “extraordinarily unfair”. Married couples and civil partners are entitled to a fair and equitable settlement, but the law leaves no such protection for cohabitees. She emphasised that women are often, but not exclusively, the ones left disadvantaged at the end of a cohabiting relationship.

Ms Thornberry confirmed the Labour Party’s commitment to reforming the law for cohabiting couples. She expressed a desire to make this a cross-party initiative, in order to achieve change.

Siobhan Baillie, MP for Stroud, closed the speeches by committing to cross-party support for cohabitation reform, stating that she “warmly welcomes working together”. She concluded that there is plenty of evidence to support reform.

Forsters’ Family team supports Resolution’s reaffirmed commitment to cohabitation reform.

To read articles on the five key recommendations in Resolution’s Vision for Family Justice, see here:

Resolution’s Fifth Vision: ‘Making Family Law Fit for Purpose’

To celebrate Resolution’s 40th Anniversary, the organisation is using Awareness Week (27 November – 1 December) to launch their Vision for Family Justice. These recommendations from family justice professionals set out how the legal system can be improved to fit the needs of modern families. The fifth vision on Resolution’s agenda is ‘Making Family Law Fit for Purpose’.

Child arrangements on separation and divorce

One recommendation is for there to be a statutory requirement to hear the voice of the child at the first hearing in child arrangement proceedings. It was found in Resolution’s polling survey that 71% of people agreed that this recommendation “will help to overcome bias of the main carer”. The centrality of the child’s voice in proceedings is paramount and building a framework around this should be a key focus for future reform in the family justice system.

From April to June 2023, it was found that on average it took 47 weeks for private law cases to reach a final order (more than double the time taken in 2016). Delay can be damaging for the child and so Resolution has recommended a statutory time limit on child arrangement proceedings. They also advocate for streamlining cases by calling for early proactive management from experienced judges or an early and effective triage hearing.

Financial remedies on divorce

In the case of spousal maintenance, Resolution has recommended that the law, in the normal course of events, should make clear that it will be for a fixed term to avoid parties returning to court. However, this should not be limited in a way which would cause hardship to the financially weaker party.

Cases where assets exceed the parties’ needs, and where they were received by way of a gift or inheritance during the marriage, or acquired after the marriage, should be non-matrimonial property. Resolution sets out the instances where such a principle should not apply, for example, where that property is required to meet needs.

International cases

Since the UK’s departure from the EU, costs, delays and complexity for those divorcing, claiming maintenance and for international child cases have increased. There have been conflicting decisions for international families with connections to the UK and an EU member state, and also gaps left in domestic legislation.

Resolution champions the simplification of the legal framework in private family law cases between England and Wales, Northern Ireland and Scotland and calls for support from the EU to allow UK accession to the Lugano Convention.

Forsters’ Family practice supports Resolution’s proposal to improve the operation of the family justice system and calls on Parliament to facilitate making family law fit for purpose.

To see Resolution’s other recommendations, follow the links to our summary articles:

  • Cohabitation reform (find the link to our summary article here).
  • Helping families to find solutions (find the link to our summary article here).
  • Protecting the Vulnerable (find the link to our summary article here).
  • Ensuring the family courts meet the needs of families (find the link to our summary article here).

Resolution’s Vision for the family courts to better meet the needs of families

Following the launch of Resolution’s ‘Vision for Family Justice’ this annual Awareness Week, all week we have been considering their five key recommendations for a number of changes to policy, legislation and processes in order to improve the family justice system in England and Wales.

The fourth objective, as set out in the Vision document, linked here, is ensuring that the family courts meet the needs of families.

Responses to Resolution’s 2022 member survey consistently reported how the significant (and worsening) increase in delays, the state of the family courts and the lack of resources negatively impacts upon children and their families. The April to June 2023 family court statistics show that children are waiting nearly a year for the courts to determine which parent they live with, or how much time they spend with their non-resident parent. This leaves families in limbo for an inordinate period of time and in an area of law where the ‘status quo’ is often used as a barometer for future arrangements, in certain circumstances, this can have a significant impact on the relationship between a child and their non-resident parent.

There are no routinely published statistics for delays in financial matters, but a judicial report from September 2021 suggested that it took two years, on average, for proceedings that reach final hearing to be concluded. That is a significant period of time for separating couples to be living with financial uncertainty and to be unable to meaningfully plan for their future.

It is, therefore, not surprising that in response to Resolution’s 2022 member survey, 90% of those surveyed said that court backlogs were causing additional and unnecessary stress and pressure for clients. Resolution’s Vision for Family Justice is therefore calling for the following:

  • No further family court closures.
  • Online processes that can be evaluated on a case-by-case basis.
  • For contested financial remedy cases under a certain value to be fast-tracked, with an emphasis on fewer hearings and shorter timescales.
  • Links to Resolution and Law for Life’s Affordable Advice Service to be provided to all Litigants in Person in the family court, and via online court services.

Whilst it is evident that longer term solutions, aimed at reducing the number of private court applications, will require appropriate investment, families need a smooth-running, accessible, contactable and responsive family court. It is hoped that these proposals aimed at ensuring that the family courts better meet the needs of families, along with more public funding for early legal information and advice, and increased access to Advice and Information Meetings, will enable all families going through a separation equal access to family justice.

Forsters’ Family department supports the recommendations made by Resolution. The other key recommendations in the Vision for Family Justice include:

  • Cohabitation reform (find the link to our summary article here).
  • Helping families to find solutions (find the link to our summary article here).
  • Protecting the Vulnerable (find the link to our summary article here).
  • Making family law fit for purpose.
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Resolution’s Vision for Family Justice on better protecting the vulnerable in the family courts

During Annual Awareness Week, in what is the organisation’s 40th year, Resolution have launched their Vision for Family Justice. This calls for a number of changes to policy, legislation and processes in order to improve the family justice system in England and Wales. The Vision document, linked here, makes five key recommendations.

One area in which Resolution proposes change is in finding ways to better protect the vulnerable. This includes supporting and protecting victims of domestic abuse in the family court, ensuring that legal aid is available for those who need it, and ensuring that children who are affected by family law matters are supported.

Supporting and protecting victims of domestic abuse

Resolution considers that one of the ways practitioners can better support their clients is by screening for domestic abuse and utilising the Resolution Domestic Abuse Alert Toolkit, to identify situations where clients may be suffering from domestic abuse and/or violence.

Resolution further proposes that the prohibition on cross-examination of victims of domestic abuse by perpetrators is extended to apply to any case and not just new cases before the court. They also highlight the importance of judicial consistency in respect of both the implementation of the relevant Practice Directions (PD 12J and PD3AA) and the approach to a need for fact-finding, which will help to maintain the integrity of the court process.

Legal aid

Legal aid is currently only available in limited circumstances. Crucially, Resolution advocates to make public funding available to both victims and alleged perpetrators in children proceedings where there have been allegations of domestic or child abuse. Resolution also proposes that the criteria is widened to include the instruction of a specialist accredited solicitor who has screened for domestic abuse and evidence from health professionals based outside the UK. Making legal aid more widely available could have a huge impact on the protection of children and vulnerable parents. It is no secret that where two parties have distinctly different financial circumstances, the court’s ability to produce a fair result is arguably impaired. Providing increased public funding would allow for greater equality of arms between litigants.

Importantly, Resolution are also pushing for legal aid to be made available for other alternatives to court, including family mediation, collaborative practice and Resolution’s single lawyer scheme. At present, legal aid in family matters is only available in cases where there are or will be proceedings underway. Widening the gateway criteria in this way would not only assist families in finding solutions outside of court but would free-up court time to allow judges to deal with cases where court intervention is most urgently required, for example those where there is a vulnerable party.

Supporting children

Resolution’s Vision also outlines that more needs to be done to help children receive the emotional and financial support they need. They are campaigning for improvement to the child maintenance system, for example by introducing statutory recognition of enforceable child maintenance agreements, and abolition of the ’12 month rule’, to ensure that receiving parents and children have increased financial protection. When it comes to ensuring that children have the appropriate financial support, Resolution highlights that it is ultimately the children of already vulnerable households who can be worst affected and need the greatest care.

Further proposals include that the UN Convention on the Rights of the Child is enshrined into English domestic law and that safeguarding for children participating in Child Inclusive Mediation is improved.

Other key recommendations in the Vision for Family Justice include:

  • Cohabitation reform (find the link to our summary article here).
  • Helping families to find solutions (find the link to our summary article here).
  • Improving the way child arrangements are handled.
  • Ensuring the family courts meet the needs of families.

Forsters’ Family department supports the recommendations made by Resolution.

Resolution’s Vision refers to the statistic that 50% to 60% of families coming to court will have allegations and/or other evidence of domestic abuse. Domestic abuse and its impact on parents and children are an important part of family practice and such cases can be hugely complex. It is not only essential that family lawyers are aware of how best to support their clients, but that (much needed) changes are made in policy and law to address the current issues facing the family justice system.

Nicholas Jacob and James Brockhurst to speak at the STEP Bermuda Conference 2023

Private Client Partners, Nicholas Jacob and James Brockhurst will be speaking at the STEP Bermuda Conference taking place on 29-30 November 2023.

This conference will bring together industry leaders, innovators, and practitioners from around the globe to for two days of unparalleled networking, knowledge sharing, and strategic insights.

Nick will be speaking on the topic of Family Wars – lessons to be learned from conflicts, covering matters such as conflicts in families, how avoidable they are and preventing mistakes for the future.

James will be speaking on the topic of Digital assets – Opportunities and challenges in modern estate planning, covering matters such as institutionalisation of digital assets, custody, challenges for service providers and tax.

More information on the conference can be found here.

Resolution’s Vision for Family Justice on helping families to find solutions

To mark their Annual Awareness Week this week and the organisation’s 40th year, Resolution have launched their Vision for Family Justice. This calls for a number of changes to policy, legislation and processes in order to improve the lives of children and families in England and Wales.

The Vision document, linked here, makes five key recommendations.

One area in which Resolution suggests change is in looking for ways to help families find solutions. They consider the current status of public funding for early information and advice, the importance of co-parenting programmes and the introduction of Advice and Information Meetings (AIMs).

Currently, legal aid in respect of family matters is only available in limited circumstances. Resolution recommends that public funding for early, tailored legal advice is prioritised, to help people understand their rights and responsibilities from the outset. Early advice can better signpost people to mediation and make it more robust, as well as helping to identify other methods of resolving disputes out of court.

This issue was recently considered by Parliament, when the House of Commons Justice Committee recommended that the Government invest in early legal advice as part of their inquiry into the future of legal aid in 2021. Resolution supports this recommendation and proposes that the Government considers scaling up services which are already working together with Resolution to increase support to Litigants in Person. The potential effect of this is important; a recent World Bank report highlighted that £1 spent on legal aid saves the state £5 elsewhere (for example through reduced court spending and fewer people receiving benefits).

Resolution also proposes that co-parenting programmes should take place earlier, and that they should be a statutory requirement before an application is issued, as is the case with MIAMs.

Resolution also recommends that statutory MIAMs are replaced with Advice and Information Meetings (AIMs) to allow people to have access to broader and more rounded advice regarding their legal rights and options (including but not limited to mediation) from the outset. It is proposed that these meetings are delivered by family justice professionals and that they should take place earlier in the process before an application to court is considered.

Other key recommendations in the Vision for Family Justice include:

  • Cohabitation reform (find the link to our summary article here).
  • Improving the way child arrangements are handled.
  • Ensuring the family courts meet the needs of families.
  • Better protecting the vulnerable in the family courts.

Forsters’ Family department supports the recommendations made by Resolution. Whilst many people can afford legal advice, many more can’t. Around 80% of cases in the family courts now involve at least one unrepresented litigant. With investment from the state in early legal advice for all, many cases will be appropriately signposted away from the family courts, freeing them up to deal with only the most appropriate cases, for example those involving a vulnerable party or those with safeguarding concerns.

New Research published by Resolution demonstrates need for Cohabitation Reform

This week (27th November – 1st December 2023) is Resolution’s Annual Awareness Week*.

In honour of the organisation’s 40th year, this week also sees the launch of Resolution’s Vision for Family Justice. The Vision document, which can be found here, draws together research, legal analysis and practitioners’ experience to make five key recommendations for the future of family law.

Top of the list of recommended reforms are proposed changes to the law relating to cohabiting partners. Currently, cohabiting couples have little legal protection when they separate. Resolution proposes urgent reform in order to make financial remedies available to separating cohabitees (subject to certain eligibility criteria). The Vision document suggests that the orders the court should be able to make for cohabiting couples be along the same lines as those available to married couples, albeit granted on a different and more limited basis. Resolution also recommends a review of the law relating to financial provision for children of unmarried parents, and the introduction of protections following the death of a cohabiting partner.

A nationwide poll commissioned by Resolution found around half (47%) of cohabitees are unaware that they lack rights should they split up. This research also revealed that:

  • 59% of people polled back better legal protections for cohabiting people.
  • 74% of cohabitees agree that ‘the current laws surrounding cohabitation are unfit for today’s modern society’.

Cohabiting couples are the fastest growing family structure. According to House of Commons Library research, 1.5 million couples cohabited in 1996 but that figure increased by 144% over the following 25 years to 3.6 million in 2021. According to the recent Resolution polling, 83% of respondents believe that cohabiting will become even more popular in future. The growing popularity of cohabitation, combined with the lack of awareness around the legal vulnerabilities of cohabitees, and the overwhelming view that the current laws are out of date, speak to the need for urgent reform in this area of the law.

Other key recommendations in the Vision for Family Justice document include:

  • There should be more public funding for early legal information and advice.
  • The way child arrangements are handled should be improved.
  • The family courts need to meet the needs of families.
  • The vulnerable must be protected in the family court.

Forsters’ family department welcomes Resolution’s Vision for Family Justice and will be supporting Awareness Week by sharing their thoughts and experiences of the issues facing the family justice system. We hope that policymakers will give vital (and overdue) attention to the needs of families and make the changes needed to create a justice system that is fairer and more fit for purpose.

*Resolution is a membership body representing over 6,500 family justice professionals. Resolution is at the forefront of campaigning for reforms to the family justice system and promoting a constructive approach to resolving family issues. All of the lawyers in Forsters’ family department are members of Resolution and subscribe to its Code of Practice.

Resolution Awareness Week

Moving to the UK: key considerations for US citizens

The US and the UK are separated by the vast and tumultuous waters of the Atlantic Ocean. Those with connections to both countries will often find themselves rowing against the tide between two very different and complex regimes. With the right specialist advice, they can navigate the cross-border challenges safely and make the best use of planning opportunities.

Understand the issues, avoid the traps, and discover ways to plan ahead in our Navigating the Atlantic series for US-connected clients.

Moving to the UK

In this instalment, we explore some of the key considerations for US citizens who are moving to the UK for the first time.


Moving to the UK


Managing the risk of double taxation from ‘Day One’

Upon becoming tax resident in the UK, individuals will become exposed to UK taxation in respect of their worldwide income and gains (subject to the remittance basis of taxation, discussed below). US persons, unlike those moving from most other jurisdictions, will also carry with them an exposure to US income tax on their worldwide income and gains. This leads to the risk of double taxation.

Welcome relief under the US-UK income tax treaty

The double taxation agreement between the US and the UK (also known as the “income tax treaty”) is designed to provide relief from double taxation. Broadly, the treaty operates by allocating taxing rights between the two countries and, to the extent that both countries have a right to tax, providing for a system of credits that allows tax paid in one country to be credited against the liability arising in the other.

Where treaty relief won’t help!

Although double taxation can generally be avoided through use of the treaty, the dual exposure can nevertheless have a significant impact on the tax-efficiency of certain types of investments – for example, where an asset is treated favourably for US purposes but is subject to higher tax rates in the UK. A classic example are US mutual funds that do not have “reporting” status in the UK1. While profits on those investments will typically be subject to capital gains rates (currently 20%) in the US, they will be subject to income tax rates (currently up to 45%) in the UK. For this reason, the UK’s remittance basis of taxation can still play an important role for US persons.

Benefitting from the “non-dom” tax regime

For so long as UK resident US persons maintain a non-UK domicile for UK tax purposes, they should be eligible to claim the remittance basis of taxation. By doing so, they can shelter their non-UK source income and capital gains from UK tax, provided those income and gains are not “remitted” to (i.e. brought to or used in) the UK.

Many US persons will claim the remittance basis for at least the first seven years of UK residence, when it is available free of charge. This offers a degree of administrative ease when compared to claiming treaty relief. After the seven-year point (when an annual charge becomes payable to access the remittance basis), the taxpayer will need carry out a mathematical exercise each year to determine whether payment of the annual charge is worthwhile.

In many cases, it won’t be worthwhile for US persons to pay to access the remittance basis because the global tax saving can be marginal once the residual exposure to US taxation is taken into account. However, it could be helpful for taxpayers who wish to maintain holdings in investments that are not tax-efficient in the UK (provided they can afford not to remit the income or gains arising on those assets to the UK).

US persons who choose to claim the remittance basis will need to take extra care around the timing of remittances and tax payments to ensure that tax credits are available. This is a complex accounting issue on which US remittance basis users will require specialist advice.

What steps should be taken ahead of time?

  • Maximise “clean capital” – Anyone who plans to take advantage of the remittance basis of taxation should explore ways to maximise “clean capital” (i.e. funds that can be brought to the UK without triggering a taxable remittance). They might do this by crystallising capital gains and/or accelerating income to be paid to them prior to their arrival in the UK. However, US persons will need to be mindful of the US income tax consequences of such planning and execute a careful balancing act between US and UK considerations.
  • Consider risks associated with existing trusts – Any existing trusts of which the individual is a settlor, trustee and/or beneficiary should be examined before the individual becomes UK resident. For instance, it is common for US citizens who are moving to the UK for the first time to already hold assets in revocable living trusts, which they have been advised to put in place in the US as a probate avoidance vehicle. The individuals will very commonly be the trustees of those trusts themselves. Consideration ought to be given to how the trusts will be characterised for UK tax purposes, as there is a risk of tax inefficiencies resulting from a mismatch in the US and UK treatment.
    The double tax risks for UK resident beneficiaries of US trusts are considered in detail in our article, ‘Welcome Relief‘.
  • Consider risks associated with existing company interests – It is common for US persons to hold assets through Limited Liability Companies (“LLCs”), which can produce tax traps for the unwary. Again, there is a likely mismatch between the US and UK treatment of these entities, which can give rise to double taxation. Broadly, this is because the US generally treats LLCs as partnerships (i.e. transparent entities) for tax purposes, whereas the default position in the UK is to treat LLCs as companies (i.e. opaque entities).
    As a result, the US will typically tax the members of the LLC on their respective shares of the underlying profits of the LLC as they arise, whereas the UK may seek to tax distributions of profits from the LLC as dividends. This mismatch can cause treaty protection to be lost, with the result that the same income or gain suffers tax twice. The options for mitigating this risk will need to be considered.
  • Consider planning opportunities before purchasing a UK home – Many US citizens who move to the UK will acquire a home there. This raises various tax, estate planning and other considerations, including mitigating exposure to UK inheritance tax and putting in place a UK will. We explore these issues in detail in our separate guide for US purchasers of UK residential property.

Contact Us

It is essential to plan in advance of a move to the UK, to take advantage of available tax reliefs and ensure arrangements are as efficient as possible. This is particularly pertinent for those with connections to the US due to their global exposure to US income tax, regardless of where they live. It is therefore important that advice is taken from advisors with an understanding of how the two legal systems interact; ideally before any action is taken. Please contact a member of our specialist US/UK team to find out more.

Disclaimer

The members of our US/UK team are admitted to practise in England and Wales and cannot advise on foreign law. Comments made in this article relating to US tax and legal matters reflect the authors’ understanding of the US position, based on experience of advising on US-connected matters. The circumstances of each case vary, and this article should not be relied upon in place of specific legal advice.


1To be a reporting fund, a fund must register with HMRC as such. In doing so, the managers of the fund must agree to comply with onerous reporting obligations regarding the performance of the fund and the distributions that are made to investors. Most non-UK mutual funds will be non-reporting funds unless they have been designed with UK resident investors in mind.


Non-dom rules to be replaced with four-year temporary residence regime

The Chancellor of the Exchequer, Jeremy Hunt, has announced that the government will abolish the current tax regime for individuals who are UK resident but not UK domiciled in favour of a residency-based system, which will apply from 6 April 2025.

Non-dom rules to be replaced

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“Succession planning down on the farm” Forsters Partner, Polly Montoneri quoted in the Times

Rural, Land and Business Partner, Polly Montoneri shares her insights on the rise in proprietary estoppel cases, in the Times article entitled “Succession planning down on the farm”.

Following a number of high profile proprietary estoppel cases over recent years, increasing public awareness and the rising value of farmland form part of the reason for the rise in proprietary estoppel disputes. Polly discusses diversification within farming as another significant factor alongside the disconnect between generations about how to develop a modern farming business, highlighting that it is one of the challenges in ensuring a smooth transition between generations.

“There has often been a generational tension about how farming assets are managed over the years. There is always a period where the older generation needs to hand over to the younger generation. That is an aspect that has long been very carefully managed by families, advisers and lawyers to ascertain the best way to progress.”

“If you look back over the past 30 years diversification has become increasingly important. Some farms and estates have diversified because they wanted to, others because they have had to. Over time the stakes have become higher, with the younger generation now perhaps more ambitious in terms of, for example, environmental sustainability and being a source for green energy, which is a huge part of how the rural economy is developing.”

To read the full article (behind a paywall) please click here.

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Moving to the UK

Explore our hub for everything you need to know about relocating to the UK and discover how our Private Wealth team can advise you on making the move as seamless as possible.

Moving to the UK is an exciting life event whether it be a short-term move for work to explore business prospects or a more permanent relocation with the whole family; the UK offers an eclectic range of options to live, work and learn, from the cityscapes of London to vineyards in the English countryside and historic university towns in-between. Setting up life in a new country can feel daunting too and it can be difficult to know where to start.

Wherever you are on your journey to the UK the Private Wealth team at Forsters are here to guide you through the process and to advise you on how to make the move as seamless as possible. From Singapore to Brazil, the US to the Middle East – we also have in-depth experience of integrating UK issues into a global cross-border wealth plan.

Our Moving to the UK hub provides you with an introductory resource to understand the need to know issues, including the *UK’s approach to income tax, visas and buying property, along with key terminology and FAQs.

View our Moving To The UK Hub

James Brockhurst to speak on family offices at the Global Partnership Family Office European Conference 2023

Private Client Partner, James Brockhurst, has been invited to join the expert panel at the Global Partnership Family Office (‘GPFO’) European Conference 2023, held at the Royal Society London, to an audience of representatives from global family offices.

James will be a panellist for the session entitled ‘The Evolving Jurisdictional Landscape’ which will explore the changing legal and regulatory frameworks that govern family offices in different regions and will discuss tax issues, compliance obligations and cross border issues for family offices with a global outlook. James will be sharing his expert insights on knowledge on especially on the Middle East.

Joining James on the panel are Ruth Bloch-Reimer of Bar and Karrer and Gavin st Piere, former Chief Minister of Guernsey. The session will be chaired by Lisa Cornwell of PWC.

More information about the event can be found here.

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Is there a capital gains tax problem on sale of marital property? Michael Armstrong and Rebecca Anstey write for Taxation

Large Buildings

Private Client Counsel, Michael Armstrong, and Private Client Associate, Rebecca Anstey, have written a piece for Taxation answering the reader’s question ‘Is there a capital gains tax problem on sale of marital property?’

In the article, Michael and Rebecca focus on a case study of a couple. Mrs B suffered a serious psychotic episode two years ago and is now permanently in hospital care. Mr B wishes to sell their home, so would like to know:

  • whether principal private residence relief (“PPR relief”) will apply; and
  • if not, whether he could transfer her share into his own name before selling using the lasting power of attorney Mrs B granted him.

Michael and Rebecca highlight that:

  • Mr and Mrs B will still be treated as ‘living together’ and having one residence for the purposes of PPR relief unless separated under a court order, by deed of separation, or in circumstances in which separation is likely to be permanent.
  • If Mr and Mrs B are permanently separated, Mrs B should still be eligible to claim PPR relief on her share of the property as the final period allowance should be extended to 36 months because she is a long-term resident in a ‘care home’ (defined in the legislation to include any establishment that provides accommodation and nursing or personal care).
  • Where an asset is transferred between spouses, such as the proposed transfer to Mr B, it will be a “no gain, no loss” transfer. This means that, unlike other gifts, no CGT liability should arise as the recipient spouse takes over the other spouse’s acquisition cost. However, previously, this treatment did not apply to separated couples after the end of the tax year in which they separated.
  • The provisions of Finance (No.2) Act 2023 (in force from 11 July 2023) now mean that if Mr B were to acquire his wife’s share of the property, then this no gain/loss treatment could now continue until the end of the third tax year after the couple ceased living together (even if Mrs B were not a long-term care home resident).
  • If Mrs B does not have capacity to make decisions, Mr B should be able to use the LPA to manage Mrs B’s share of the property but the court would need to approve a gift of it to Mr B and any sale or other transfer would need to be in her best interests.

Download the full article here.

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Emma Gillies to attend STEP Miami’s 12th Annual Summit

Private Client Partner, Emma Gillies, will be attending STEP Miami’s 12th Annual Summit taking place in Miami on October 18 – 20.

The conference will bring together professionals from around the globe to discuss the newest changes, updates, and trends in the market for international private client planning.

If you are planning on attending the event and would like to meet with Emma, please do get in touch.

More information on the conference can be found here.

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Forsters retains top tier status in eprivateclient’s Top Family Law Firms 2023

The Forsters’ Family team has retained their Top Tier status in ePrivateClient’s ‘Top Family Law Firms’ 2023, a comprehensive guide of the leading law firms providing family law advice in the UK.

Forsters are delighted to be recognised for our family law expertise, which cover the full range of family law matters including pre and post nuptial agreements, separation arrangements, matters involving children, financial issues and divorce for clients both in the UK and overseas.

The team continuously delivers excellent results for their clients in the most complex of cases.

Click here to view the 2023 rankings (behind a paywall).

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Kelly Noel-Smith and John FitzGerald write for Taxation on the UK tax residence net

Private Client Partner, Kelly Noel-Smith, and Private Client Senior Associate, John FitzGerald, have written an article for Taxation entitled ‘No escape’ in which they explore the question of whether an individual escapes the UK tax net when they become non-UK resident?

The article is derived from the ‘Relocating to the UK’ campaign of Forsters’ Senior Executives Advisory Committee, which Kelly leads and of which John is a key member. It highlights these key points:

  • the temporary non-residence rules;
  • dual residence: an individual may be resident for tax purposes in more than one jurisdiction and may benefit under the provisions of a double tax treaty;
  • the 2015 CGT changes for non-residents;
  • the election for a property to be treated as a main residence for the purposes of PPR relief; and
  • minimising exposure to UK tax during a period of non-residence.

The full article can be read here.

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Perspectives: Women in Leadership – Charlotte Evans-Tipping to speak at the Jersey Finance event

Private Client Partner, Charlotte Evans-Tipping, is joining the panel in Riyadh as part of Jersey Finance’s ‘Perspectives: Women in Leadership’ series of events.

Delegates at this women only event will hear Charlotte and other female business leaders share their experiences of the financial services industry in a panel discussion.

The event offers insights from a range of experts, with the aim of enabling women in leadership to connect and build a global network.

For more information, please click here.

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Forsters’ Private Wealth lawyers recognised in Spear’s Tax and Trusts Indices 2023

Seven Partners have been listed in the Spear’s Tax and Trusts Indices 2023:

Spear’s publishes annual rankings of the top private client advisers and service providers to HNWs. These are drawn up on the basis of peer nominations, client feedback, interviews, data supplied by firms, as well as information gathered by the Spear’s editorial and research teams. The Tax and Trusts Indices are a guide to the finest tax advisers and lawyers working with high and ultra high net worth clients around the world.

We are delighted that the hard and dedicated work our Private Wealth team carry out for their clients has been echoed by this year’s listings.

The complete Spear’s Tax and Trusts Indices can be viewed here.

The news follows the team’s recent success at the STEP Awards 2023, where Forsters were named as the winner of three categories.

Forsters Private Wealth sweeps up trio of awards at the STEP Private Client Awards 2023/24

The judges at the prestigious STEP Private Client Awards 2023/24 named Forsters as the winner of three awards, showcasing the firm’s Private Wealth team as a global leader in advice to international families and in the field of digital assets, while recognising the team’s leadership for its commitment to its people. The team was also shortlisted for Private Client Legal Team of the Year (large firm) and Family Business Advisory Practice of the Year.

The judges commended Forsters in each of the three winning categories:

  • International Legal Team of the Year (large firm) – The judges described the winning entry as ‘simply excellent’. In an impressive field, Forsters stood out for its ability to attract and secure new clients, handle multi-jurisdictional projects effectively, and find innovative solutions; while the team’s governance work was recognised for its sensitivity to family dynamics. Overall, the team presented as the quintessential International Legal Team.
  • Digital Assets Practice of the Year – Forsters was well known as being one of the first to advise on digital assets. It had continued to innovate to meet client needs and combine technical skill and knowledge with client focus and thoughtfulness. The judges commented on its commitment to developing the industry through leadership in best practices for crypto and collaboration with HMRC.
  • Employer of the Year – Forsters had been carbon neutral since 2007. The leadership of the Private Wealth Team had a demonstrable commitment to employee well-being and open communication with associates through its Village Hall sessions. Twin teams of partners supported its junior lawyers through a mentor programme, and associates were involved in managing key client relationships.

The STEP Private Client Awards took place on 21 September 2023. The awards are regarded as the hallmark of quality within the industry, recognising and celebrating excellence among private client professionals. Attracting entries from across the globe, submissions are judged rigorously by an independent panel of experts made up of internationally renowned private client practitioners.

Head of Private Client, Xavier Nicholas, commented: “We are extremely proud to have been recognised by STEP for these three awards. They demonstrate our ceaseless commitment to our international client base, the entrepreneurial spirit of our partners in reaching into new practice areas, and our belief in looking after our team and supporting them to be the best lawyers in their field while feeling engaged in the business.”

STEP Private Client Awards - International Firm

STEP Private Client Awards - Digital Assets

STEP Private Client Awards - Employer

Talking Family Law – the Resolution Podcast co-hosted by Simon Blain shortlisted at the Family Law Awards

Family Partner, Simon Blain co-hosts the Talking Family Law – the Resolution Podcast with Anita Mehta. The podcast, now in its third series has been shortlisted as Family Law Commentator of the Year at the LexisNexis Family Law Awards 2023.

As Resolution family law experts, Simon and Anita welcome guests to take a deep dive into topical issues in Family Law covering the whole spectrum of family law, from abduction, surrogacy, and public law to financial remedy. Guests have included Mr Justice Mostyn, HHJ Roberts & HHJ Hess.

The Family Law Awards will be held on Monday 27 November 2023 at Park Plaza Westminster Bridge, winners will be elected by an esteemed judging panel made up of Family Law experts.

To find out more and to listen to the Resolution podcast click here.

Simon and the Forsters Family team are members of Resolution, a community of family justice professionals who work with families and individuals to resolve issues in a constructive way. They campaign for better laws and better support for families and children undergoing family change.

The Forsters Family team won Family Law firm of the Year (London) at the 2021 Family Law awards.

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Jeremy Robertson and Charlotte Evans-Tipping named ePrivateclient’s NextGen Leaders 2023

Private Client Partners, Jeremy Robertson and Charlotte Evans-Tipping have both been recognised as ePrivateclient’s NextGen Leaders 2023, the definitive annual list of leading young private client practitioners in the UK and UK Crown Dependencies.

The rankings were open to nominees from within the private client advisory professions. Those listed were recognised for their individual qualities and achievements. Other factors taken into account included the reputation or performance of the company that the nominee works for, feedback from peers, as well as any volunteering outside of work, or mentoring and advocacy within the industry.

Jeremy was promoted to partner in Forsters’ private client team in April 2021. Jeremy has extensive experience of advising both UK domestic and international clients on all aspects of personal taxation, corporate and trust structuring, estate planning and family governance. He works closely with UK entrepreneurs, business owners, executives and their families on capital taxation and succession planning. His areas of expertise include the development and implementation of estate plans for both UK and non-UK resident individuals, tax planning, advising on the structuring options for acquiring UK property, creating and advising on the tax treatment of trusts and trust administration. Jeremy’s practice includes family office work (both in terms of supporting existing family offices and working with clients to develop and build family offices). He is also experienced in advising on the creation and on-going management of family investment, and other succession planning structures. Aside from his legal work, Jeremy co-heads Forsters’ charities and community group.

Charlotte was promoted to partner in the private client team at Forsters in April 2023. She advises high net worth individuals, families, trustees, beneficiaries, family offices and private banks on family governance and succession planning, trust law and personal taxation. She is particularly interested in family governance and structuring work, which involves working closely with founders and business families to understand their ethos and long-term objectives. Charlotte devises bespoke structures (using trusts, foundations, family constitutions etc.) to achieve their succession aims. Many of her clients are from the Middle East, but this work is transferable to onshore clients. She is a member of the firm’s pro-bono committee and assists with the firm’s pro-bono clinic partnership programme.

The full rankings are available to view online, click here for part one and here for part two.

This annual listing supersedes the ePrivateclient UK and UK Crown Dependencies Top 35 Under 35, which launched in 2009.

Jo Edwards quoted in The Times on the Parental Alienation debate

In The Times’ article entitled “Parental alienation triggers debate”, Head of Family, Jo Edwards shares her views on some of the challenges facing the courts in complex private law children cases.

Recent research published by academics at the University of Manchester highlighted the use of “parental alienation” as a concept used in some family cases to counter claims of domestic abuse. The researchers have renewed the debate over the use of parental alienation as a legal argument, particularly against the backdrop of concern about the Family Court’s ability properly and sensitively to deal with allegations of domestic abuse; an increase in both cases involving so-called alienating behaviour, and those where accused perpetrators of domestic abuse wrongly raise alienation in response to those allegations; and growing pressure on the family courts to deal with a rising number of applications for child arrangement orders.

Jo highlighted that where allegations of alienating behaviour are raised in response to claims of domestic abuse “the court is left in the invidious position of trying to decide what the true position is and what are the interim and long-term arrangements for the child that would be in their welfare interests and safe”.

In relation to the report published this week, Jo said that “the sad reality is that while the cases highlighted are worrying, shocking and inexcusable, there are countless children across the country who no longer see one of their parents because of alienating behaviours by the other parent and which the family courts have been powerless to fix”.

The debate highlights the need for an accepted legal definition of parental alienation and the challenges the court faces in getting decisions right for children.

The full article can be read here behind a paywall.

Forsters’ Family team have extensive experience of complex children work, as well as cases where the issues are more straightforward. We help parents with these cases in a variety of ways, be it through solicitor negotiation, mediation, early neutral evaluation, children arbitration or court.

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Wealth that works: Alfred Liu joins other private wealth experts for an ESG-focussed STEP Journal roundtable discussion

Private Client Senior Associate, Alfred Liu, shared his views as a Family Governance and Next Gen adviser at the latest STEP Journal roundtable discussion, sponsored by Hawksford.

The conversation focused on sustainable investing, examining who the responsibility sits with and how trustees and advisors can manage their fiduciary duty as they balance environmental, social and governance (ESG) factors and return on investment.

When asked how ESG values and sustainable legacy considerations develop in his family governance and business advisory experience Alfred comments:

“It’s incumbent on us as advisors not to be static and to be very aware that families evolve. In turn, structures and investment strategies need to be updated. What does it take for families to consider sustainability? It tends to be the second or third generations that are driving those discussions because they’re the ones considering the implications of the structures the first or predecessor generation has picked. It’s important for us to be able to discuss and educate, help families find where the common values and disparities lie, and get consensus to preserve harmony – which is a big part of any meaningful family governance exercise”.

Click here to read more about the roundtable discussion in the STEP Journal, Issue 4 2023.

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Forsters Property Litigation and Private Client teams recognised at the British Legal Awards 2023

High Rise Building Real Estate

Forsters have been shortlisted for two awards at the 14th annual British Legal Awards 2023:

  • Litigation, Arbitration and Dispute Resolution Team of the Year
  • Private Client Team of the Year

The shortlistings recognise the achievement of the Property Litigation team in relation to the Supreme Court appeal concerning the Tate Gallery, and our Private Client team’s extensive work on a multi-generational matter for an international ultra-high net worth family.

Forsters is proud to have received nominations at the British Legal Awards for five consecutive years. The awards represent the top advisors and firms within the UK’s legal community.

The full shortlist can be viewed here. The winners will be announced at the ceremony on Wednesday 29 November.

James Brockhurst to speak on Tax issues for Middle Eastern families at Informa Connect’s Cross-Border Planning Conference 2023

Private Client Partner, James Brockhurst has been invited to speak at Informa Connect’s Conference ‘Cross-Border Planning: Wealth Management Solutions for the New Age Business Family’.

Taking place from the 25 – 26 October in Dubai, the programme will provide updates on key issues facing the internationally mobile private client, as well as provide opportunities to discuss succession planning, immigration, family governance and family offices, and business law developments.

James will be speaking at the panel discussion ‘Introduction to US, UK and Canadian Private Client Issues in the Middle East’, which will cover the following:

  • Case studies from each jurisdiction
  • Tax planning Issues with trusts
  • Residence and domicile issues
  • How do you expatriate and what is a US/UK/Canadian citizen?
  • Considerations for banking problems and FATCA/CRS

Joining James on the panel will be John Shoemaker, Partner at Butler Snow, and Reaz Jafri, Counsel at Withers.

For more information and to book a place at the event, please click here.

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When can a creditor get a piece of the pie? – Patricia Boon and Maryam Oghanna write for ThoughtLeaders4 Private Client Magazine

In an article entitled La Dolce Vita – When can a creditor get a piece of the pie? Private Client Partner, Patricia Boon and CTE Senior Associate, Maryam Oghanna examine the recent case of La Dolce Vita Fine Dining v Zhang Lan and others, where the High Court of Singapore held that funds in bank accounts within a family trust structure were the property of the settlor, and therefore capable of being recovered by creditors of the settlor. Patricia and Maryam consider the potential impact on trust establishment and management and what conclusions practitioners can draw from this case.

The article was first published in issue 11 of ThoughtLeaders4 Private Client Magazine – Offshore Edition and can be read in full below. A PDF version of the article can be found here.


Click here to download our Article


La Dolce Vita – when can a creditor get a piece of the pie?

In the recent case of La Dolce Vita Fine Dining v Zhang Lan and others [2022] SGHC 278, the General Division of the High Court of Singapore (the ‘Court’) held that funds in bank accounts within a family trust structure were the property of the settlor, and therefore capable of being recovered by creditors of the settlor.

Understandably, any decision of a court to lift the curtain on a trust structure and allow creditors to access trust assets will raise concerns for private wealth practitioners and their clients. This article examines the Court’s decision in La Dolce Vita and considers the potential impact on trust establishment and management and what conclusions practitioners can draw from this case.

Background

The first defendant, Mdm Zhang Lan (‘Mdm Zhang’), was a highly successful businesswoman and founder of the South Beauty restaurant chain. She had sold a majority stake (83%) of the South Beauty business to CVC Capital in 2013 for the sum of US$254,419,156. These funds had been paid into Mdm Zhang’s personal account at Bank Safra Sarasin Hong Kong.

The fourth defendant, Success Elegant Trading Limited (‘SETL’), is a BVI company which had been wholly owned by Mdm Zhang until June 2014. At that point, Mdm Zhang established the Success Elegant Trust (the ‘Trust’), an irrevocable Cook Islands family trust that she settled for the benefit of her son, grandchildren and remoter issue. She then immediately transferred the sole share of SETL to the trustee of the Trust. She also transferred US$142,051,618 from her personal Safra Sarasin account to two bank accounts held in the name of SETL at Credit Suisse and Deutsche Bank (the ‘SETL Banks Accounts’).

Since then, Mdm Zhang has been embroiled in arbitration proceedings with La Dolce Vita Fine Dining Co Ltd (‘LDVL’), an investment vehicle of CVC Capital and the plaintiff in this case, over claims of fraudulent and negligent misrepresentation. In March 2015, LDVL was successful in obtaining a freezing order against Mdm Zhang in her personal capacity. Although the freezing order only named Mdm Zhang, Credit Suisse and Deutsche Bank froze the respective SETL Bank Accounts upon being served with the order.

In May 2020, LDVL succeeded in registering arbitral awards in its favour in the Hong Kong and Singapore courts. LDVL then proceeded to enforce its judgment debts, including through an application to the Court to appoint a receiver over the SETL Bank Accounts.

The Role of Receivers

The purpose of a receiver is to stand in the shoes of a debtor and do what the debtor should have done, in good conscience, to discharge the debt. In common law jurisdictions, the court has the power to appoint a receiver when it is just and equitable to do so.

Receivers usually appear in cases where alternative enforcement methods are ineffective or not possible. For example, receivers can be appointed to preserve property at risk of dissipation, such as in the high profile English Supreme Court case of JSC BTA Bank v Ablyazov [2015] UKSC 64, where a freezing order was thought to be inadequate in circumstances where the defendant’s disclosure of assets had been incomplete.

Further, a creditor may seek appointment of a receiver to pursue the equitable interests of a debtor, as seen in a few previous English High Court decisions. These include JSC VTB Bank v Pavel Skurikhin & Others [2015] EWHC 2131 (Comm), where the High Court appointed a receiver over trust assets over which the settlor had de facto control.

The Court’s Decision

LDVL sought an order from the Court appointing receivers over the SETL Bank Accounts on the basis that, notwithstanding SETL’s legal ownership of the funds within those accounts, either (i) Mdm Zhang was the beneficial owner of the funds in the SETL Bank Accounts by way of resulting trust; or (ii) Mdm Zhang exercised a level of control over the assets tantamount to ownership.

Mdm Zhang opposed the appointment, contending that the funds in the SETL Bank Accounts were held for the benefit of her son and his issue once they had been transferred from her Safra Sarasin account.

The Court was required to determine two issues:

  1. Could receivers be appointed over property in which the debtor has effective control but no equitable interest; and
  2. Were the funds in the SETL Bank Accounts beneficially owned by Mdm Zhang (by way of resulting trust or otherwise)?

On the first issue, the Court drew a distinction between the notion of de facto control and beneficial interest. The key point made by the Court was that even if a debtor had de facto control over an asset, the actions that a receiver may take would be limited by the rights of the debtor. Receivers are not able to compel third parties (such as trustees) to take certain actions if those third parties are not obliged to comply with the debtor’s instructions. If, as a matter of fact, that third party would have complied in any event, this is tantamount to a factual control which may not be reflected in the actual rights of the debtor. As LDVL did not contend that Mdm Zhang had rights over the SETL Bank Accounts other than via her beneficial ownership, the Court turned to the second issue.

On the second issue, the Court noted that a resulting trust arises where one party transfers property to another without the intention to benefit the other, and that it was required to assess Mdm Zhang’s intention at the time of transfer to the SETL Bank Accounts. The evidence before the Court included instances of Mdm Zhang interfering with the SETL Bank Accounts (such as the transfer of funds in November 2014 to purchase a property in New York) and a letter from her lawyers stating that she ‘maintained’ the Deutsche Bank account. The Court inferred that Mdm Zhang was motivated by a desire to protect her funds from potential claims by LDVL without giving up her ability to use those funds for her own benefit and held that she therefore retained a beneficial interest. The court subsequently made the order for appointment of receivers over the SETL Bank Accounts.

Comment

The judgment in favour of the plaintiff, whilst somewhat alarming to trust lawyers at first sight, is not particularly surprising in light of the facts of the case.. Rather than lifting the curtain on a trust, the decision held that the funds were not truly trust assets as they were still beneficially retained by the settlor. Therefore, it is our view that this case should not raise significant concerns about the viability of trusts in Singapore, or elsewhere.

Nevertheless, there are some practical points arising from this case which practitioners should bear in mind:

  • how much control a settlor may have over trust assets – as we have seen in recent years, courts are willing to find that a settlor’s beneficial interest has not been effectively alienated if they have retained too much control over a trust structure or its assets (see JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2017] EWHC 2426 (Ch)). While certain jurisdictions have reserved powers legislation which permits the reservation of certain powers to the settlor, La Dolce Vita is another reminder that it is always prudent to assess and limit the amount of control that a settlor has over the trust assets, particularly where the settlor is concerned about asset protection risks.
  • role of the trustee – the trustee of the trust should ensure that it exercises its powers and duties properly and independently and that it does not slavishly follow the wishes of the settlor.
  • ensuring that the settlor understands the purpose and function of the trust – it is important that the settlor should be properly advised when setting up a trust structure, so that they understand that they are relinquishing control and ownership of the assets to the trustee.
  • property comprised in the trust – as a matter of best practice, the trustee and settlor should keep an appropriate record of the property that is comprised in the trust and, if there is involvement from a third party in dealing with trust assets, there should be clarity over the capacity in which that third party is acting.

Trusts are still important vehicles for asset protection and wealth and succession planning. The judgment in La Dolce Vita is a salutary reminder of the importance of respecting the integrity of the trust and operating the trust appropriately to ensure that it offers robust protection to the settlor and beneficiaries.

The Chambers HNW Guide 2023 extends its recognition of Forsters’ Private Wealth practice with the elevation in Private Wealth Disputes and Family rankings

The Chambers HNW Guide is seen as the definitive authority for best-in-class law firms, based on extensive market research conducted annually, the guide ranks the leading professional advisors to the Private Wealth market.

This year Chambers have elevated Forsters to Band 1 for Private Wealth Disputes and Band 2 for Family/ Matrimonial Finance: Ultra High Net worth, as well as maintaining our Band 1 status in Private Wealth Law and High Net Worth Residential Property. Our Art and Cultural Property team also maintains its Band 2 ranking. The rise in the rankings for our Contentious Trusts & Estates and Family teams demonstrates the breadth of quality of our Private Wealth practice and our ability to advise our clients on all aspects of their legal requirements.

The 2023 HNW Guide also recognises 23 individual lawyers at Forsters. Nick Jacob and Dan Ugur are recognised as ‘foreign experts’ in Singapore and our Family team’s mediation practice is acknowledged with Joanne Edwards‘ inclusion in the Spotlight Table for Family/Matrimonial: Mediators.

Private Wealth Law – Band 1

Ranked Lawyers: Nick Jacob, Dan Ugur (elevated to band 3), Xavier Nicholas, Carole Cook, Catherine Hill, Kelly Noel-Smith, Emma Gillies and Charlotte Evans-Tipping.

Chambers feedback: “Forsters has real strength in combining technical excellence with commercial awareness.”

Private Wealth Disputes – elevated to Band 1

The elevation to Band 1 follows the team’s success at the Chambers High Net Worth Awards where they were awarded Contentious Trusts & Estates Team of the Year. They were recognised for “having received especially strong feedback from its competitors in this market. The group, headed by Roberta Harvey, added Hannah Mantle to the partnership this year and brought in highly-rated litigator Alison Meek in 2022. The team can also celebrate a new ranking for associate Maryam Oghanna who is building a name for herself in this practice area.”

Ranked Lawyers: Roberta Harvey, Emily Exton, Alison Meek, Hannah Mantle (newly ranked as Up and Coming), Ashleigh Carr and Maryam Oghanna (newly ranked as Associates to Watch)

Chambers feedback: “I have been incredibly impressed. They are real specialists in this area and know their stuff. Communications are clear and prompt, but always polite and friendly. They have great depth in talent and are excellent at client management.”

Real Estate: High Value Residential – Band 1

Ranked Lawyers: Lucy Barber, Helen Marsh, Robert Barham (elevated to band 2) and Charles Mieville (elevated to band 3).

Chambers feedback: “Forsters is technically exceptional.” “They are one of the top firms in the enfranchisement area.”

Family/Matrimonial Finance: Ultra High Net Worth – elevated to Band 2

Ranked Lawyers: Joanne Edwards, Rosie Schumm, Simon Blain and Dickon Ceadel (elevated to Up and Coming)

Chambers feedback: “The team has the depth required to manage any case, with access to the wider support of a top-class full service firm.”

Art and Cultural Property Law – Band 2

Ranked Lawyers: Catherine Hill and Laura Neal

Chambers notes: The art and cultural property practice at Forsters brings together lawyers from across the firm. It regularly advises collectors, galleries and auction houses, and is particularly notable for handling estate planning and commercial matters for artists.

Jo Edwards quoted in the FT on the Government’s proposal to introduce mandatory mediation in family cases

Head of Family, Jo Edwards, has been quoted in the FT on her response to the UK government’s proposal to mandate mediation for separating couples before being able to make a court application, in an effort to ease the pressure on the justice system.

In the article, entitled ‘Plans to force separating couples into mediation in England and Wales attacked’, Jo explains that couples who plan to go to court face “horrific” waits for cases to conclude.

This was confirmed by the official data published last week which showed that the average duration of private law children cases has more than doubled since 2016 to 47 weeks. However, despite these statistics family justice professionals do not agree that mandating mediation is the solution.

A key area of concern is the risk this would pose for victims of domestic abuse. The Ministry of Justice have stressed that they would not be obliged to attend sessions with their former partner, but Jo questions whether the system would have enough resources to triage effectively.

People working in the family justice system make a broader case for public funding of advice and counselling at an early stage of separations. Such a system would make it “far less likely that agreements will break down later” and end in court, said Jo. More limited reforms may be more likely, however.

The full article can be read here.

Jo gave oral evidence to the Justice Select Committee on 19 June about the Ministry of Justice’s recently concluded consultation on supporting earlier resolution of private family law arrangements. Read more here.

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After FTX: What’s next for digital assets? Highlights from James Brockhurst’s panel session at Spear’s 500 Live

Private Client Partner, James Brockhurst, was invited to join an expert panel session on digital assets at the Spear’s 500 Live Conference 2023.

In the session ‘After FTX: What’s next for digital assets?’, James joined Anatoly Crachilov, CEO and founding partner of Nickel Digital Asset Management; Richard Shade, COO of Archax and Chris Cox, VP of GSR Capital, to discuss how high net worths and family offices should approach these assets in 2023 and beyond.

The panel highlighted that where digital assets are concerned, there is much to learn. James confirmed that there is catching up to do from a legal perspective, with many firms still “grappling with the nature of blockchain”.

In the session James explained how he advises clients on their digital assets. When advising clients with assets over a certain threshold, a trust or foundation are the most frequently used solutions, however, this is not always an option for digital assets with many trusts weary to take on these assets and the associated counterparty risk.

He also reminded the audience that the clients themselves can also present a challenge; “A lot of the early adopters of digital assets are hostile to the idea of having a trustee: ‘Why should I hand over my assets to you?’ To that I would say, there are solutions – you can structure things through a foundation or a private trust company where you can sit on the board, so you do have that level of control.”

You can watch the full panel session here.

James is recognised for being one of the first lawyers to develop an expertise in cryptoassets and is the author of ‘Cryptoassets for Private Clients: A Practitioner’s Guide’, a book aimed at legal practitioners in the UK and other common law jurisdictions and covers the issues of cryptoassets and blockchain technology.

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Jo Edwards gives oral evidence to the Justice Select Committee on supporting earlier resolution of private family law arrangements

Head of Family, Jo Edwards, gave evidence to the Justice Select Committee on Monday 19 June about the Ministry of Justice’s recently concluded consultation on supporting earlier resolution of private family law arrangements.

Following the submission of Resolution’s written response to the Ministry of Justice’s consultation, to which Jo contributed as Chair of Resolution’s Family Law Reform Group, Jo was invited to speak in more detail to MPs about the current problems facing the family justice system and how meaningful change may be effected. Jo shared her thoughts on how all forms of Dispute Resolution (DR) should be considered to ensure people have access to the option which best suits them and that children are protected from the fallout of acrimonious separation. She also highlighted the importance of any form of DR remaining voluntary, in order to maintain the integrity of the process, and emphasised that reform must include resources for initial legal advice and signposting. She spoke of the importance of broader public education about alternatives to court/some of the pitfalls of court.

This is the fourth time Jo has given evidence to a parliamentary committee about the family justice system. Jo sits on Resolution’s National Committee and is an active campaigner for family law reform. She is also a qualified mediator and collaborative practitioner.

Resolution is a community of family justice professionals who work with families and individuals to resolve issues in a constructive way. They campaign for better laws and better support for families and children undergoing family change.

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STEP Asia Conference 2023 – Nick Jacob to moderate session on ensuring effective family office governance

Private Client Partner, Nick Jacob, has been invited to moderate a session on family governance at the STEP Asia Conference 2023.

The STEP Asia Conference brings together speakers and attendees from around the world to discuss cutting-edge topics relevant to the wealth management community.

Nick will be moderating the session entitled ‘Ensuring effective family office governance’ on 14 November at 12:00 HKST.

The session will see an expert panel address the following issues:

  • What are the roles of a family office and how can these be implemented, achieved and monitored?
  • What procedures need to be put in place to operate a successful family office?
  • How does one distinguish the interests of the various stakeholders such as the family and the managers?
  • Are family offices inherently inefficient compared to the discipline one would expect to see in, say, a listed company?

Joining Nick for the session are panellists Thomas Ang of Credit Suisse AG, Cynthia Lee of Central Cove and Christian Stewart of Family Legacy Asia (HK) Limited.

The Conference will run from 14-15 November 2023 at the Grand Hyatt Hong Kong. To find out more, please click here.

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STEP Private Client Awards 2023/24: Forsters’ Private Wealth team shortlisted in five categories

Forsters’ Private Wealth team has been named a finalist in the most number of categories of any firm, with five nominations in the STEP Private Client Awards 2023/24:

  • Private Client Legal Team of the Year (large firm)
  • International Legal Team of the Year (large firm)
  • Family Business Advisory Practice of the Year
  • Employer of the Year
  • Digital Assets Practice of the Year

The STEP Private Client Awards are seen as the hallmark of quality within the private client sector, recognising and celebrating excellence among private client professionals. Attracting entries from across the globe, submissions are judged rigorously by a top tier of independent panel of experts comprising of internationally renowned practitioners in the wealth management arena. Finalists are recognised for a wide range of capabilities including their; ability to demonstrate their capacity to undertake complex and demanding client issues; world-class innovation and commitment to the industry.

Forsters’ five nominations showcase the breadth of specialisms within our Private Wealth practice and most notably our experience in advising international family businesses as well as digital assets.

The news follows our continued success at the annual STEP awards, where Forsters have been named winners in at least one category since 2018 and most recently named Family Business Advisory Practice of the Year in 2022.

The winners will be announced at the Awards Ceremony on 21 September 2023. The full shortlist can be found here.

STEP Private Client Awards - We're shortlisted logo

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Singapore’s The Business Times features Nick Jacob’s insights on succession in Asia

Private Client Partner, Nick Jacob, has been profiled by Singapore’s The Business Times, in an article entitled ‘Business families’ secret to succession is when boss/dad/mum learns to let go’.

Labelled “the godfather of Asian Family Governance work” in the Chambers HNW 2022 Guide, Nick has unparalleled experience advising high net worth clients on putting together plans that provide for family succession, the protection of the family business, the avoidance of family disputes, and all aspects of international family governance.

In a video call with Singapore’s The Business Times Nick shared his experience of working with HNW family businesses in Asia and the challenges these families must face.

In the article, Nick emphasises the importance for heads of family businesses to address conversations around succession planning earlier to preserve their dynasty for more than a generation.

He reflects on a particular case, where the client regrettably passed before finalising his succession plan, resulting in the split of the family business and a significant loss in the value of a business the client spent his entire life building. “If he had bitten the bullet 10 years earlier, it is quite possible that the business could have been saved”.

Nick explains that many families are now realising the pressures of time and describes a “definite shift from a decade ago”. Clients are now approaching him earlier than before and preparing for a “gradual changing of the guard”. He notes that “while more than half of his clients used to reject the idea of passing on elements of control, including their voting shares in the company, only one in four still take such a stand today.

He recommends that “the heads of families should have succession plans by the time they are 70 at the latest. The patriarch will be seen to have enough influence, that he will not allow himself to lose face, or will not allow himself to be demoted to second division, and the family respects that”.

The article also features interviews with the founder and executive chairman of the Banyan Tree Group, Ho Kwon Ping and other prominent advisors in the industry.

The full article can be read here, behind the paywall.

To find out more about International Succession Planning and Family Governance you can read Nick’s article here. Please do get in touch with Nick to discuss the issues raised in these articles.

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Caroline Harbord and Hannah Mantle to speak at Mourant’s Trusts and Private Wealth Forum 2023 in Jersey and Guernsey

Dispute Resolution Partner, Caroline Harbord, and Contentious Trusts and Estates Partner, Hannah Mantle, have been invited to speak at Mourant’s Trusts and Private Wealth Forum 2023 in Jersey and Guernsey.

Widely recognised as the leading trusts and private wealth event in the Channel Islands, it consistently delivers the latest insights on key topics and trends in the sector.

Caroline will be speaking at the Jersey Conference on July 4 and Hannah will be speaking at the Guernsey Conference on July 6. Both will be joining partners at Mourant to discuss the key cases from the last year.

Further information on both events can be found here.

Emma Gillies to speak at Vie International’s 2023 PPLI Conference

Private Client Partner, Emma Gillies, has been invited to speak at the Vie International ‘Life and Legacy’ PPLI Conference 2023.

Emma will join a panel of experts, who will deliver a market update on Prime Residential Property in the UK, and discuss the tax planning strategies that should be considered by foreign buyers.

The conference will take place on June 14 at the Royal Automobile Club in London and will bring together leading advisors to high net worth private clients with US connections.

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Caroline Harbord, Jeremy Robertson and Maryam Oghanna to present to STEP Jersey

Dispute Resolution Partner, Caroline Harbord, Private Client Partner, Jeremy Robertson, and Contentious Trusts and Estates Senior Associate, Maryam Oghanna, are presenting a lunchtime session to STEP Jersey and the Société Jersiaise, on the topic of trustees and investments.

The session will focus on the key protections and pitfalls that trustees should be aware of when holding financial investments.

The team will consider the key provisions that can be included in the trust instrument, and in particular reservation of trust investment powers, including when they may be suitable/appropriate, pitfalls and areas of concern and UK tax considerations.

They will also consider the potential claims and liabilities that trustees may face when investments go south, together with the claims that trustees might consider pursuing against third parties as an attempted shield to beneficiary claims. The team will talk about how the risks of pursuing third party claims can potentially be mitigated by litigation funding and ATE insurance, and also the strategic considerations a trustee may wish to consider if it finds itself on the receiving end of a funded and insured claim.

The presentation will take place on 28 June 2023.

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Chambers HNW Awards: Forsters’ Private Wealth practice shortlisted for four awards

Forsters’ Private Wealth practice have been nominated for both team and individual awards at the Chambers HNW Awards 2023:

  • Private Client Team of the Year
  • Contentious Trusts and Estates Team of the Year
  • Rising Star – Hannah Mantle, Contentious Trusts and Estates Partner
  • Star Associate/Junior Under 10 Years’ Call – Maryam Oghanna, Contentious Trusts and Estates Senior Associate

The awards are based on the research for the recent edition of Chambers High Net Worth and reflects the achievements over the past 12 months including outstanding work, impressive strategic growth, and excellence in client service.

Head of Contentious Trusts and Estates, Roberta Harvey, commented: “I am delighted that our CTE team has been recognised in three categories this year. The shortlistings showcase the strength of our growing team and the commitment and expertise shown by the team”.

Head of Private Client, Xavier Nicholas, commented: “It’s great to see our top-band Private Client team recognised as one of the best in the field, in a year in which we have continued to see growth in demand for our advice to HNW families across all disciplines”.

The winners will be announced at the award ceremony on 13 July 2023.

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Divorce-proofing trusts

Structures crave stability. You wouldn’t choose to build in an earthquake zone. If you had no choice but to do so, you would ensure your structure had sufficient flexibility to withstand a powerful shock.

Divorce is a major source of instability for a family wealth-holding structure because it exposes the structure to scrutiny by a powerful and potentially hostile external body – the family court.

Following the earthquake analogy, in an ideal world, wealth-holding structures would be created in such a way that they are outside the reach of the family court. Failing that, they should be created in such a way that they can adapt and, if necessary, absorb a certain amount of damage without compromising their structural integrity.

This article is based on English law, but the points raised are very much applicable to divorce proofing trusts in most common law jurisdictions.

Jurisdiction

  • Not all family courts are equal. Some will have little knowledge or understanding of trust structures or will lack powers to compel disclosure or compliance by trustees. Others, particularly those in common law jurisdictions, will be very familiar with trusts structures and will have an arsenal of legislative weapons available.
    As Mr Justice Coleridge famously said in (J v V (Disclosure: Offshore Corporations) ): these sophisticated offshore structures ……..neither impress, intimidate, nor fool anyone”.
  • When considering jurisdiction, much thought is given to the “best” jurisdiction for the trust and firewall legislation However, less thought is given to another aspect of jurisdiction: what are the factors that will enable a beneficiary or their spouse to invoke the jurisdiction of a particular family court?
  • Each jurisdiction has its own rules setting out the circumstances in which a party can apply to be divorced in that jurisdiction. There is no international convention regulating the question (although EU member states have a common set of rules), so any dispute as to which is the proper forum for a particular divorce is likely to involve litigation in two jurisdictions. The potential jurisdictional net is cast wider than one might expect.
  • It is relatively easy for a couple to move in and out of the jurisdiction of the English family court at different stages of their lives. It is also noteworthy that an individual who has an English domicile, but who has spent little or no time in England, can find themselves subject to the English family court if they divorce.
  • There is little that trustees can do to prescribe the divorce jurisdiction of their beneficiaries. However, trustees and their advisers should consider:
    1. Reviewing the likely family court jurisdiction that would apply to each of their beneficiaries at the time the trust is established. That information will prove invaluable when considering what protective steps can and should be taken.
    2. Taking advice if a beneficiary is contemplating moving abroad to establish whether they are potentially entering the jurisdiction of a more hostile family court.
    3. If a beneficiary is contemplating marriage, make enquiries as to the intended spouse’s background (nationality, domicile, habitual residence) and take advice as to whether they will potentially “import” the jurisdiction of their home family court.
    4. Generally keeping abreast of the beneficiaries’ marital situations so the trustees are warned as early as possible of any forthcoming difficulties. However, it is vital that the trustees to NOT take peremptory steps (such as excluding a spouse) if the beneficiary’s marriage is faltering. This is like a red rag to a bull so far as the divorce courts are concerned.
  • The family court’s powers

    Family courts often have extensive powers in relation to trustees and trust assets:

    1. Power to compel disclosure. Parties to financial remedy proceedings on divorce are subject to a “duty of full and frank disclosure” in relation to their financial affairs. That requires parties not merely to provide information that is in their knowledge or possession. A beneficiary will be expected to request information from trustees regarding the extent of trust assets and the likelihood that a request for assistance will be agreed to.
    2. If the court feels a beneficiary is being deliberately obstructive, the court has power to join the trustees as a party to the proceedings and to require them to provide information regarding trust assets. Trustees are then faced with difficult decisions about whether to submit to the court’s jurisdiction or to refuse and risk potentially adverse publicity if the judgment is published. Joinder can also lead to expensive satellite litigation in the trust’s home jurisdiction as guidance is sought from the local court.
    3. Power to vary the terms of a trust if that trust is found to be a “nuptial settlement”, which can be defined as “a settlement for the benefit of one or both of the parties or their children, created because of the marriage, or referring to the marriage, whether made before the marriage (ante-nuptial settlement) or after it (post-nuptial settlement)”. The court often has the power to vary such a settlement by, for instance, reinstating a spouse who has been removed from the class of beneficiaries, or requiring the trustees to make a distribution to a beneficiary to pay off his or her spouse.
    4. The court sometimes has resorted to “judicious encouragement” in cases where a beneficiary professes that they are unable to receive a benefit from a trust once the divorce has concluded. In such cases, the court would award the beneficiary spouse a smaller proportion of the matrimonial assets on the basis that the court expected that the trustees would make up the shortfall once the case was concluded, either directly or through a “forced” distribution to the beneficiary.
    5. The power, in appropriate circumstances to “pierce the corporate veil” as the court seeks to establish the underlying beneficial ownership of assets held in complex structures. (Prest v Petrodel Resources Ltd & Ors ).
    6. In the great majority of cases, where adequate disclosure is made, the family court will understand and respect the trustees’ role. However, the court will look beyond the terms of the trust deed and will examine the extent to which the beneficiary has in fact benefited and the extent to which they can expect to do so in future. So established patterns of benefitting can be detrimental in such circumstances.
    7. Dynastic Trusts: a trust that is dynastic in nature is far less likely to suffer adverse consequences than a trust which is clearly primarily for a beneficiary who is divorcing. The court is generally reluctant to interfere with the potential benefits of future generations.
    8. Reserved Powers: Settlors reserving powers of revocation, and/or other reserved powers, such as the power to determine distributions and certain extensive investment powers, may find that the courts order them to exercise those powers to bring back the assets into their hands for the purposes of the divorce.
    9. Letters of Wishes: Courts are very likely to want to see Letters of Wishes, as they often reveal the real intended beneficiaries and how they will benefit. It is essential to draft them carefully, and with this in mind. They should not be changed when a marriage break-up is in prospect.
    10. Is it a trust at all? The very recent La Dolce Vita case in Singapore is a timely reminder that if the trust is, in reality, the settlor’s “alter ego”, then divorce courts will look straight through the trust and regards the assets as those of the settlor.

    Nuptial agreements – pre- and post

    A nuptial agreement can perform a number of useful tasks in an asset-protection context:

    1. Fixing jurisdiction. A nuptial agreement will typically contain clauses in which the parties agree to submit to a particular jurisdiction. They provide powerful evidence of the parties’ intentions at the time they signed the agreement and can be helpful if jurisdiction becomes contested.
    2. Fixing choice of law. In addition, a nuptial agreement will typically contain a choice of law clause. This will specify the law which is to be applied when interpreting and giving effect to the agreement, regardless of where the divorce takes place.
    3. Arbitration. It is common for nuptial agreements to contain an arbitration clause. Arbitration frequently provides a swifter, less costly and more confidential form of dispute resolution, as compared to court proceedings.
    4. Punitive costs. Agreements will frequently contain a clause specifying that a party who seeks to challenge a nuptial agreement in court should be required to pay the other party’s costs.
    5. Confidentiality. Nuptial agreements will typically contain extensive confidentiality clauses. In addition to the above, the principal purpose of a nuptial agreement is to set out the terms on which the couple agree their financial claims should be resolved in the event of divorce.

    For international couples, care should be taken, wherever possible, to ensure the nuptial agreement will be upheld in each state which could potentially have jurisdiction to hear the divorce.

    In England, the Supreme Court considered whether nuptial agreements should be upheld in the landmark case of Radmacher v Granatino . Their conclusion was that they should, subject to some important provisos (neither party should be under undue pressure to sign, both should provide a reasonable level of disclosure of assets, each should have independent specialist legal advice, and the agreement should not be unfair).

    For those seeking to mitigate the risk of divorce to structures, therefore, the first step is to ensure beneficiaries enter into a nuptial agreement. We often recommend a clause in the trust deed obliging a beneficiary marrying to enter into a pre-nuptial agreement, unless that provision is waived because the trustees are satisfied that it might be disadvantageous. Failure to do so could mean the beneficiary being excluded or receiving less than they otherwise would.

    The Family Court always retains oversight. A pre-nuptial agreement cannot therefore be enforced in the same way as a contract, since the court will always retain the ability to decide whether it would be fair to hold the parties to the terms of the agreement. Even if a nuptial agreement is challenged, however, it is likely that it will result in a far more restricted award than if there were no agreement.

    Governance considerations:

    1. Selecting jurisdiction for structures and investments (there is little point in setting up a Cook Islands structure if the underlying asset is a UK residential property).
    2. Considering carefully the class of beneficiaries.
    3. Considering carefully whether a new or existing structure risks being considered a “nuptial settlement”.
    4. Considering whether to create a separate trust or sub-trust for a beneficiary perceived to be exposed to divorce risk, so as to limit the potential damage to wider structures.
    5. As part of wider family governance conversations, consider a requirement that all beneficiaries are expected to enter into nuptial agreements to protect the trusts, and granting trustees the power to treat those who fail to do so less generously (or to exclude them altogether).
    6. Focus on making trusts dynastic in nature.
    7. Take great care over reserved powers and revocation powers.
    8. Draft Letters of Wishes very carefully, and on the assumption that the divorce court will see it.
    Simon Blain
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    Modern Families: Dickon Ceadel speaks at Private Client Global Elite Rising Leaders Brunch 2023

    Family Partner, Dickon Ceadel, provided a session in London today at the annual Private Client Global Elite Rising Leaders Brunch entitled ‘Modern Families’ alongside Sarah Aughwane of Withersworldwide.

    Dickon’s segment covered the cross dimensional elements of modern family cases focussing on issues surrounding surrogacy and cohabiting couples.

    Please contact Dickon if you would like further information on either of these topics.

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    Will My Prenup Be Valid When I Move To England? – Simon Blain writes for Abode2

    White dove

    Prenups are often familiar territory to many HNW and UHNW international couples. Still, careful consideration must take place pre-arrival and once moved, as prenups aren’t automatically enforceable in the English courts.

    Once a couple becomes habitually resident in England, any future divorce and financial settlement is likely to be determined according to the law of England and Wales. This means that a prenup is only likely be upheld if it meets certain conditions, including:

    • the prenup has been entered into freely;
    • each party has taken independent legal advice;
    • there has been material financial disclosure by both parties; and
    • the agreement is fair – crucially this is determined at the point of the divorce, rather than at the time the agreement is signed.

    It is important that any existing overseas prenup is reviewed to ensure the above criteria are fulfilled and that it takes account of changed circumstances following the relocation.

    For those who don’t have a nuptial agreement in place, investing in property in the UK can act as an ideal segue to negotiate a postnup.

    How can cohabiting couples protect their property when moving to England?

    It’s often assumed that a couple that cohabitates for an extended period of time will have the same rights as a married couple if they separate. However, in England, there’s no such thing as common law marriage. This doesn’t mean that one party can’t make a claim against the other concerning the property, and in fact, there are several legal means by which they can do this, especially when children are involved.

    How does a cohabitation agreement work for international couples?

    For international cohabiting couples acquiring property, we always recommend a cohabitation agreement, as it can protect the individuals from any issues should the relationship end and mitigate any long legal battles. An agreement allows both parties to regulate the terms of their cohabitation and provides clarity throughout the relationship and if it breaks down.

    An agreement incorporates or is accompanied by a declaration of trust in relation to property, confirming the parties’ respective beneficial interests. It can also help couples to navigate resolution around other issues such as how household expenses are split, what happens if one party wishes to sell the party, but the other doesn’t, financial provision during and after cohabitation as well as living arrangements and financial support for any children.

    In our experience, the security and clarity through prenups, postnups or cohabitation agreements offer great relief to couples if the relationship ends in the future.

    This article deals with the position in England and specialist advice ought to be taken as necessary regarding the position in Scotland.

    This article was first published for the Abode2 luxury property publication, which can be accessed here.

    For more information on our services for individuals and families relocating to the UK, see here.


    Moving to the UK – Everything you need to know

    Moving to the UK is an exciting life event whether it be a short-term move for work to explore business prospects or a more permanent relocation with the whole family; the UK offers an eclectic range of options to live, work and learn, from the cityscapes of London to vineyards in the English countryside and historic university towns in-between. Setting up life in a new country can feel daunting too and it can be difficult to know where to start.

    Moving to the UK

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    The Great Freeze UK style – Maryam Oghanna writes for Private Client Business

    Contentious Trusts and Estates Senior Associate, Maryam Oghanna, together with Richard Dew of Ten Old Square, have authored an article for Private Client Business on the effect of UK sanctions on trusts with a connection to Russia.

    This is the second of two linked articles, the first dealing with restrictions imposed by the EU that targeted trusts with a ‘Russian Connection’ as adopted through two EU regulations, and this second instalment undertaking a comparison of the two regimes.

    The full article can be read here, behind a paywall.

    The first in the series can be read here, behind a paywall.

    Richard Dew and Maryam Oghanna, ‘The great freeze: UK style, Private Client Business 2023, 2, 54-59.

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    Divorces hit ten-year high as financial strains show: Dickon Ceadel quoted in ‘The Times’

    Family Partner, Dickon Ceadel, has been quoted in ‘The Times’ on the rise in divorce applications as the increased cost of living puts marriages under further strain.

    Dickon comments that ‘Soaring interest rates and high inflation will have put many families under enormous pressure’. However, for wealthier individuals, the currently economy may prove advantageous with business valuations falling. Dickon states ‘Some will be lucky enough to see a business worth £10 million valued at £5 million today’. He goes on to add that ‘falling house prices can also make periods of economic stress a good time for financially weaker parties to divorce – they might be able to take the house in the financial settlement at a reduced valuation.’

    The full article can be read here (behind a paywall).

    Forsters’ divorce statistics have also featured in The Times Money Mentor guide.

    Contact the Family team here for further information.

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    Claims against Accessories to breach of trust: Spotlight on dishonest assistance – Maryam Oghanna writes for ThoughtLeaders4 Private Client Magazine

    Maryam Oghanna, Senior Associate in our Dispute Resolution team, has authored an article for Thought Leaders 4 on the topic of claims against accessories to breach of trust.

    The article was first published in ThoughtLeaders4 HNW Divorce Magazine in March 2023 and can be read in full below.


    Dishonest assistance is one of a limited number of claims that may be brought against a person, other than a trustee, who has assisted the trustee in committing a breach of trust. Where the remedy against the trustee would be inadequate, accessory claims against a third party (particularly where they involve large financial institutions) can be an appealing prospect. If the claim is successful, the third party is liable to personally account for the breach of trust as if they were the trustee.

    In order to bring a successful dishonest assistance claim, a claimant would need to meet the following test:

    1. There is a trust;
    2. There is a breach of trust by the trustee of that trust;
    3. The defendant induces or assists that breach of trust; and
    4. The defendant does so dishonestly.

    As we discuss further below, the final test – showing that the defendant acted dishonestly – is the most difficult hurdle for a claimant to overcome. There is no requirement for the trustee to have acted dishonestly in committing the underlying breach of trust. But, given that the accessory defendant is one step removed from the breach of trust, the additional requirement of dishonesty is unsurprising.

    Standing

    Although the basis of liability is in equitable wrongdoing, a dishonest assistance claim derives from a breach of trust by a trustee. Therefore, the same rules apply in respect of standing to bring the claim. It has been more common for a successor trustee (including administrators) or wronged beneficiaries to bring the claim against the third party, but it is also possible for the trustee who committed the breach of trust to bring the claim.

    Untangling the Claim

    Requirement 1 – ‘There is a trust’

    It must be shown that a trust exists. However, there is no requirement for a formal trust which expressly vests property in a trustee. There need only be a fiduciary duty in relation to that property. For example, a director of a company might be deemed to be a trustee in relation to the company’s property for these purposes, even though the company owns its property.

    Requirement 2 – ‘There is a breach of trust by the trustee’

    If there is no breach of trust (which includes breach of fiduciary duty), it cannot be shown that the defendant was an accessory. Therefore, it is essential that a breach of trust claim against the relevant trustee has been established prior to the bringing of a dishonest assistance claim.

    Requirement 3 – ‘Inducing or assisting the breach of trust’

    Whether the defendant induced or assisted the breach of trust will be a matter of fact, and there is no subjective element to this requirement. It must be shown that the defendant’s conduct did, in fact, assist the trustee in committing a breach of trust. The assistance must be more than just of minimal impact, but it need not be shown that it would inevitably lead to the losses that were suffered. Unlike a claim for knowing receipt, the defendant need not have received or handled property.

    Requirement 4 – ‘Dishonesty’

    The test for dishonesty in a claim of accessory liability for breach of trust is set out in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 at [389], and clearly indicates an objective test of honesty which is a question of law. However, this is to be determined in light of the defendant’s knowledge of the breach and dishonesty at the time, creating a subjective element to the test.

    The test has since developed to accept that a defendant does not need to be aware that his conduct would be characterised as dishonest by ordinary standards (Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67; [2018] A.C. 391 at [62]). The subjective element extends to the circumstances at the time, and even the defendant’s own experience and intellect (Twinsectra Ltd v Yardley [2002] UKHL 12; [2002] 2 A.C. 164 at [121]).

    Further, when considering the defendant’s ‘knowledge’ at the time of the breach, a defendant may be found liable if they suspected that they may be assisting a breach of trust but wilfully took no steps to ascertain either way: referred to as ‘blind-eye knowledge’ (Manifest Shipping & Co Ltd v. UniPolaris Insurance Co Ltd [2003] 1 AC 469 at [112]). Carelessness will not on its own be sufficient to establish knowledge, but it may be deemed to be a contributing factor.

    Where the allegations are against a company or legal person, the dishonesty must still be evidenced by reference to one or more natural persons (Stanford International Bank Ltd v HSBC Bank plc [2021] EWCA Civ 535 at [47]).

    Comment

    Dishonest assistance is a fault-based and serious claim and the test for the dishonesty requirement has, perhaps unsurprisingly, generated much discussion.

    Any allegations of fraud or dishonesty must be clearly pleaded in statements of case, which may cause a significant hurdle and additional cost risk for many claimants who may have limited knowledge of the particulars of the dishonesty.

    Further, success of the claim will likely hang on the evidence before the court in relation to the defendant’s dishonesty, which, if the defendant is competent in their deception, may well be documentlight. In those circumstances, oral evidence at trial can carry much weight (as seen in the rather surprising decision of the Supreme Court of Gibraltar in Lavarello v Jyske Bank (Gibraltar) Ltd, unreported, May 17, 2017, Gib SC, later overturned by the Court of Appeal for Gibraltar in Lavarello v Jyske Bank (Gibraltar) Ltd 2017/CACIV/006 & 007).

    Despite the difficulties in bringing the claim, the benefit of pursuing a remedy against another, potentially more affluent, party in relation to a breach of trust is weighty. This is particularly the case if trust assets have been dissipated as a consequence of the breach of trust. Accessory claims are therefore likely to remain a regular feature in the English and Welsh High Court.

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    Navigating the art market as a private buyer

    In this episode, Charles Cochrane of Cochrane Adams Fine Art Agents and Jo Thompson, part of the Art & Cultural Property team at Forsters, joined host Robert Linden Laird Craig to talk about the, often very subjective, features of the art market. In particular, the discussion covered how buyers can approach becoming successful collectors in the face of pressure from the many people and organisations, all with very different objectives, vying for attention.

    You can get in touch with Charles for help starting your journey as an art collector by visiting the Cochrane Adams website. To read Jo’s comprehensive guide to owning art that she put together with Sotheby’s, follow the link here.

    In this episode we were joined by:

    Listen to more episodes and subscribe

    You can listen to more episodes of the More Than Law podcast here on our website, as well as subscribe on your favourite podcast services, including SoundCloud, iTunes/Apple Podcasts, Spotify, Stitcher.

    To continue the conversation on social media, use #MoreThanLawPodcast.

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    How to avoid double taxation and UK inheritance tax? Xavier Nicholas answers reader question in the FT

    Head of Private Client, Xavier Nicholas, answers a reader in the Financial Times who asked how, as US citizens moving to the UK, he and his family could avoid the traps of double taxation and manage exposure to UK inheritance tax.

    In his reply, Xavier explains the importance of getting advice before moving, highlights the impact of US worldwide taxation, and draws attention to some of the potential mismatches between the US and UK tax regimes.

    The question and answer are available to view here (behind a paywall).

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    James Brockhurst publication ‘Cryptoassets for Private Clients: A Practitioner’s Guide’ named Book of the Month at Wildy & Sons

    Private Wealth Partner, James Brockhurst, has published his book entitled ‘Cryptoassets for Private Clients: A Practitioner’s Guide’. Butterworths are the publisher.

    This practical and authoritative text is aimed at legal practitioners in the UK and other common law jurisdictions and covers the issues of cryptoassets and blockchain technology.

    James has channelled his years of practice in cryptoassets and both UK and international trusts and tax into the guide which includes, over the course of ten detailed chapters:

    • A primer on cryptoassets and blockchain technology
    • In-depth coverage of the primary structures and forms of cryptoassets and their legal status
    • Practical chapters on smart contracts, Non-Fungible Tokens and Decentralised Finance
    • Insights on the practice of cryptoassets as they relate to trusts, estate planning, probate, and wills
    • Analysis of complex legal issues around cryptoassets, including tax considerations and private client regulation

    The book also includes contributions from Alex Tamosius, Rory Carter and Zahava Rosenthal. The forward is by the Rt Hon Lord Neuberger, former President of the Supreme Court of the United Kingdom.

    Cryptoassets for Private Clients: A Practitioner’s Guide is currently listed as ‘Book of the Month’ on Wildy & Sons Ltd and can be ordered here.

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    The Taxation of Heritage Assets: Rebecca Meade writes for ThoughtLeaders4

    Private Client Senior Associate, Rebecca Meade, has authored an article for the ThoughtLeaders4 Private Client Tax Magazine entitled ‘Saving heritage assets for the nation whilst saving tax – the taxation of heritage assets’.

    In the piece, Rebecca covers the acceptance in lieu (“AIL”) scheme, that allows taxpayers to give ‘pre-eminent’ assets to qualifying public institutions in payment of inheritance tax. She goes on to address what is considered a ‘pre-eminent’ asset, provides an example of the AIL scheme in practice, and explains the various other tax reliefs available for national heritage assets.

    The full article can be accessed here.

    If you would like further information on the topic of the taxation of heritage assets, please contact our Art and Cultural Property Team.

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    Sotheby’s and Forsters – An Owner’s Guide to Art – Part 5

    Buying and owning art can be one of life’s greatest joys. But while the drive to own art is often fuelled by an emotional connection with a piece or the prospect of holding a lucrative investment, it is important for buyers and owners of art to keep their wits about them, from both a legal and practical perspective.

    Felix Hale (Sotheby’s Tax, Heritage and UK Museums Team) and Jo Thompson (Forsters LLP’s Art Group) aim to point those wanting to buy, sell, and hold works of art in the right direction. This five-part mini-series will cover the following key areas:

    1. Acquiring and selling art
    2. Transporting art
    3. Maintaining your collection
    4. Passing on your art collection to the next generation
    5. Art and philanthropy

    This piece is aimed primarily at private individuals with a UK tax exposure.

    Part 5 – Art and Philanthropy

    There are a wide range of philanthropic schemes in the UK that incentivise owners of art to support museums and galleries. In some cases, the tax benefits associated with the schemes are such that owners can end up in a better financial position than they would have been had they sold their works on the open market. Offers in lieu of inheritance tax and Private Treaty Sales to certain UK institutions offer some of the most significant incentives and enrich owners and the UK national heritage alike!

    The Cultural Gifts Scheme

    The Cultural Gifts Scheme incentivises owners of ‘pre-eminent” works of art and other objects to donate them to museums and galleries in the UK. To qualify as ‘pre-eminent’ the works must be considered to be of either national, scientific, historic, or artistic importance (works of art and other objects don’t necessarily have to be of high value to meet this threshold).

    If you make a donation to a museum under the Cultural Gifts Scheme, you will receive 30% of the agreed value of the object to set against your income tax or capital gains tax liability, which can be spread over a maximum of five UK tax years. Companies can also take advantage of the scheme and can set 20% of the value against their corporation tax liabilities.

    Sotheby’s have worked on some wonderful Cultural Gifts, including Damien Hirst’s Bognor Blue, 2008, which was donated by Hirst’s business manager, and friend Frank Dunphy to Pallant House Gallery in Chichester.

    Other Charitable Gifts

    If your object is not pre-eminent or you prefer to keep things more straightforward, you can make a gift outside of the Cultural Gifts scheme. Gifts of works of art to charities are free of inheritance tax and capital gains tax.

    If, after your lifetime, you decide to leave 10% of your net chargeable estate to a charity, the rate of inheritance tax applicable to your estate will be reduced from 40% to 36%. Giving works of art as a gift to museums and galleries in your will or asking your executors to make charitable gifts of artwork in order to meet the 10% threshold could enable your estate to benefit from the reduced rate of tax. To take advantage of this tax treatment, it is essential that the charity is considered a charity for the purposes of UK law. Please contact Forsters if you would like advice on making charitable gifts of artwork either during your lifetime or in your will.

    Establishing an Art Charity

    If you wish to establish a more regular pattern of donations to art-related causes, then it may make sense to set up an art charity (sometimes referred to as art foundations) of your own. In the UK, a charity must have a charitable purpose that is recognised under English law (for example, the advancement of the arts, culture and heritage) and it must provide a public benefit – any private benefit must be incidental. Forsters has known clients to establish charities that provide museums with financial support for the purchase of art; hold an art collection for the public to enjoy; offer financial assistance to artists by creating artist residencies; or which have an educational objective, such as informing the public about the life and work of an important artist.

    A UK charity can be structured either as a trust or company, and usually the structure will be informed by the intended purpose of the charity. A trust structure is often more appropriate when a charity is grant-making and a corporate structure is more suitable for a charity engaged in more complex operational activities and contractual arrangements.

    Establishing and maintaining a charity is not a task to be undertaken lightly. It can take time to register a charity with the Charity Commission and rigorous rules and duties need to be complied with on an ongoing basis. That being said, provided that careful thought is given to the operations, governance and funding of the charity, establishing and maintaining a charity can be incredibly rewarding and will enable you to have a greater degree of certainty as to how the charity’s assets are applied. Forsters would be happy to advise on establishing and maintaining a charity with a focus on the arts sector.

    Gift Aid

    You may wish to consider donating money to UK museums and galleries. The Gift Aid scheme allows taxpayers who give cash to charities to claim higher and additional rate tax relief on the gift. The charity can also reclaim tax on the donation at the basic rate, which means that for every £1 donated, the museum can claim 25p.

    Private Treaty Sales to UK Museums and Galleries

    If you are considering selling a work of art, and depending on the calibre of that work, there might be a significant financial advantage to selling the work privately to a qualifying UK museum or institution. If the work is ‘pre-eminent’ (or has previously been conditionally exempted from capital taxes (estate duty, inheritance tax or capital gains tax), then the sale to the museum or institution is exempted from capital taxes and the seller is incentivised by a tax incentive (called the ‘douceur’) which is usually 25% of the tax that would otherwise have been payable.

    The beneficial tax treatment is best illustrated in an example. Imagine that you had inherited from a parent a piece of artwork that was considered to be pre-eminent. On your parent’s death, an inheritance tax liability of 40% had arisen on the value of the artwork, but the charge had been deferred due to the availability of the conditional exemption (see Part 4 for more information on this). A couple of years have passed since you inherited the artwork (which has not increased in value) and you have now decided that you would like to sell it. Both a qualifying UK museum and a private buyer offer to purchase the artwork at the market value of £100,000.

    If you sell to the private buyer:

    Market value of painting
      £100,000
    Deduct inheritance tax at 40%
    (the deferred charge will be triggered on the sale)
      £40,000
    Value of paintings, net inheritance tax
      £60,000
    You receive
      £60,000

    Contrast this with a qualifying sale to the museum:

    Market value of painting
      £100,000
    Deduct notional inheritance tax at 40%
      £40,000
    Value of paintings, net notional inheritance tax
      £60,000
    Add tax incentive (25% of total tax liability)
      £10,000
    You receive the “special price” of
      £70,000

    So, if the sale of the artwork would either give rise to an inheritance tax, estate duty or capital gains tax charge, then a private treaty sale to a qualifying museum or institution is seriously worth considering. The higher the tax (for example, the rate of the estate duty can be as high as 80%) the greater the value of the ‘douceur’.

    The museum also benefits from the tax advantage, as it does not have to pay the full market price for the piece but the ‘special price’ instead. This makes the scheme very attractive to acquiring museums. The National Gallery bought Orazio Gentileschi’s masterpiece, The Finding of Moses, through Sotheby’s using this scheme.

    Acceptance in Lieu (AIL)

    Broadly speaking, the Acceptance in Lieu scheme allows you to pay some or all of your inheritance tax liability with a ‘pre-eminent’ work. As with private treaty sales (see above), individuals wishing to take advantage of the scheme are incentivised with douceur of 25% of the notional inheritance tax that would have been due. Offers in lieu of tax can be a fantastic way of dealing with large tax liabilities, either following a death or after the sale of conditionally exempt objects.

    There is a huge range of items that can be offered in lieu of tax. Sotheby’s have advised on offers ranging from paintings by Van Dyck to a steam locomotive (!) to Gauguin’s last literary manuscript, Avant et Après, the latter of which settled £6.5 million worth of tax and is now on display at the Courtauld Gallery.

    If you are considering taking advantage of the Cultural Gifts Scheme or AIL, or entering into a Private Treaty Sale, please get in touch with Sotheby’s and Forsters.

    We hope you have enjoyed this mini-series and found it helpful. For all art-related queries, please contact Sotheby’s or Forsters.

    Felix Hale at Sothebys

    Felix Hale is a Deputy Director in Sotheby’s Tax, Heritage & UK Museums department. He works with some of the most significant estates and collections in the UK, working with clients on valuations, sales, offers in lieu of tax, and claims for Conditional Exemption. He is a member of PAIAM (Professional Advisors to the International Art Market, Vice-Chair of the next generation board) and a member of STEP (Society of Trust and Estate Practitioners).

    If you would like to contact Felix, you can email him on [email protected].

    Jo Thompson from Forsters

    Jo Thompson is an associate in Forsters’ Private Client team and part of Forsters’ Art and Cultural Property Group. She acts for UK and international clients, advising high net worth individuals, families, landed estates, family offices, trustees and beneficiaries on a range of estate, trust and tax planning matters. Her work includes succession planning for a number of living artists and advising on heritage property matters. She also acts for high net worth individuals and trustees holding significant art collections.

    If you would like to contact Jo, you can email her on [email protected].

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    Why Family Governance is Important – Patricia Boon speaks to Jersey Finance

    Private Client Partner, Patricia Boon, speaks to Jersey Finance about what Family Governance means and why it is so important for wealthy families in Asia.

    Speaking to Business Development Consultant, Maria McDermott, Patricia explains the concept of family governance and shares why it is so important in succession planning, particularly in times of divorce or conflict.

    The video can be viewed here.

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    Family Mediation: carrot or stick?

    Non-court dispute resolution offers alternatives to separating couples that can reduce the financial, time and emotional burdens often associated with going to court.

    Among the many types of non-court dispute resolution in family cases, mediation is particularly effective in a broad range of cases. Because of this and the huge burdens on the courts at present, some are now considering policy options to require couples to mediate, or otherwise more forcibly be required to consider it. There are risks, however, that mandating couples to participate in mediation would undermine a fundamental plank of the process, its voluntary nature, and in doing so lead to outcomes that are less likely to ‘stick’. Is encouraging voluntary participation in mediation the better way forward?

    The problem

    Everyone agrees that the family courts are overburdened with cases that (in many instances) should be resolved via non-court processes. Policy makers are looking at ever more innovative ways to provide – and perhaps even enforce – the potential for non-court dispute resolution processes to resolve family disputes faster, with less acrimony and lower costs. Although this has been a clarion call for many years in the family justice system, leading to the advent of the MIAM in 2011, the sweeping cuts to Legal Aid 10 years ago as a result of LASPO brought new impetus to the calls for mediation to be brought front and centre in the family justice system. With the traditional gateway to mediation (via funded initial legal advice) gone, mediation stats plummeted and applications to court sky-rocketed. The Family Solutions Group report, ‘What About Me’ (published in November 2020) highlighted the void this has left where there is a lack of public awareness of mediation and poor signposting towards it or any other non-court dispute resolution. Whilst some said recommendations (focused on public education and practitioner training, among other things) were made, the dial hasn’t moved on.

    In November 2021 the Justice Minister, Dominic Raab said that “we ought to be much, much better at using ADR, mediation in particular“. In June 2022 he added that he believes that “Mediation protects children, by removing the bitterness of parental disputes from the amplifying court room“. Sir Andrew McFarlane (President of the Family Division), meanwhile, has spoken extensively on this topic, most notably in various speeches in September and October 2022 announcing the ‘Relaunching family mediation’ project. Speaking on BBC Radio 4 in November 2022, he opined that as many as one-fifth of divorce cases are going to court when not required. Family court judges have also contributed to the discourse, most significantly HHJ Wildblood, who has criticised parents vocally for going to court over non-legal parenting decisions and encouraged parents to use mediation instead. It is increasingly common to see family judges voicing their frustration at couples who are over-burdening the court with superfluous applications.

    Although there is no ‘one size fits all’ in family law, some leading judges and policy-makers are pinpointing mediation as a process that (almost) all couples should use. A stronger uptake in mediation could ease the demand on the over-stretched Family Court system and lessen the ever-lengthening delays that couples with more complex disputes experience when going through the Family Court.

    Over the last decade, some ‘carrots’ have been implemented by policy makers to entice couples to use mediation to resolve their dispute. For example, since 2014 most separating couples who wish to use the court process to resolve their family disputes must show that they attended a MIAM (a Mediation Information and Assessment Meeting). During a MIAM couples will be educated about mediation and assessed for whether it might be suited to their case, with the aim of encouraging awareness and participation. Pursuing mediation following the MIAM is voluntary, and some blockers to couples doing so have been (a) how easy it is for people to circumvent the MIAM requirement, without any checks and (b) how difficult it is to engage the respondent. Another initiative, which has had some success in increasing participation in mediation is the voucher scheme. Any couple who attended their MIAM after March 2021 is offered a ‘mediation voucher’, which pays up to £500 of the couple’s mediation costs, should they pursue this route.

    However, despite these ‘carrots’, the number of couples using mediation to resolve family disputes has not risen in the way hoped (the real litmus test being the family courts, which have seen a 5 week increase in private law cases being resolved in the last year alone, and an overall doubling in case length times in only 6 years).

    So, how could more ‘sticks’ be deployed to encourage family disputes to be resolved out of court? And is this appropriate?

    Recent commentary has suggested that a stricter approach to participate in family non-court dispute resolution could be on the cards. One such option would make attending a mediation session compulsory for all couples before they can even apply to court to resolve their dispute. Another is paving the way for the making of costs orders, to be imposed upon those who (in the view of the court) refuse unreasonably to engage in non-court dispute resolution processes. But both options seek to force couples away from the court without fully guiding them as to what their other options are and what could help them most effectively.

    Compulsory mediation

    It is clear that compulsory mediation is of great interest to policy makers as an option. This would likely require, as it does in other jurisdictions, couples to attend at least one mediation session before they can make a court application. Exceptions would be built in where there is a serious concern about the individual couple mediating, for example if there was a history of domestic abuse. Such an approach has already been adopted in Australia, where couples in a parenting or child arrangements dispute must attend a one-hour mediation session before they can apply to the court. Sir Andrew McFarlane has openly displayed interest in the Australian system; if it continues to be seen as a success it is possible English legislators could adopt this approach also.

    Despite the allure of a mechanism for fast and effective dispute resolution, there are also risks associated with compulsory mediation. Making mediation compulsory may help some couples resolve their dispute sooner, but it also may have a negative impact on others. Many family law commentators agree that mediation is as a process that works best if the parties come to it voluntarily and willing to mediate. In fact, if either party is unwilling to engage, mediation can worsen the situation as parties create harder lines, and anger and resentment is stoked. Secondly, compulsory mediation would delay many couples getting to a conclusion, likely causing unnecessary stress along the way and potentially enabling one party to exploit the process and even benefit from delay (except where used during a natural gap in a court process). Thirdly, to build and maintain a system that can provide high-quality mediation to the thousands of couples who presently pass through the family courts each year will need recruitment and training of additional mediators to build up capacity. To maintain the integrity of the family justice system, extensive checks will need to be in place to ensure that mediators are adequately qualified and are executing their role correctly. How would all that be funded?

    Costs orders

    The use of costs orders is another route that could force some couples to think more closely about mediation. The court may be given powers to order that a party pay an element of the other party’s costs if the person against whom the costs sanction is imposed refused unreasonably (in the view of the court) to engage in non-court dispute resolution earlier in the process/at all. This practice is commonplace in PI claims where the use of Ungley Orders, which require a party who has been unwilling to use non-court dispute resolution to justify their reasons for doing so at the end of the court process. If the court does not accept their justification as reasonable, they may be ordered to pay a proportion of the other party’s costs. Arguably, there are family cases where this could be done already, for example if there is deemed litigation misconduct. However, this has rarely been exercised. One issue with this deterrent is that it is retrospective, and so doesn’t save the emotional trauma and cost of going through litigation for the parties. For others who really do need the court’s assistance, they may be deterred so much by fear of a costs order against them that they settle prematurely and on the wrong terms. This can be particularly dangerous in relationships where there is an imbalance of power. Another issue it could raise is one of child welfare in cases where making a costs order against one party could have an adverse impact on any children of that party. Further, it could also risk breaching mediation privilege if attitudes to mediation are unpicked and examined by the court (especially where mediation has been attempted by the couple).

    Are there more ‘carrots’ that could be used to increase the uptake in non-court solutions?

    Early intervention is key. One of the issues with the current MIAM system is that it occurs at a very late stage, when issues have already escalated and positions often hardened. It can be much more difficult to entice parties into effective mediation at this stage, though skilled mediators would say (rightly) that it’s never too late. Early intervention could take the form of access to free or subsidised legal advice at early stages of separation, and/or the option posited by Resolution and the Family Solutions Group of an IAM (Information and Assessment Meeting). An IAM would aim to inform and signpost couples to their court and non-court options as soon as possible post-separation/relationship breakdown when they would likely be more amenable and willing to mediate, and would focus on all forms of non-court dispute resolution. Policy makers must move away from the notion of one size fits all.

    Rather than the use of an Ungley Order, which is deployed at the end of court proceedings, earlier mechanisms could be more effective whereby the party refusing to mediate (or use other forms of dispute resolution) has to justify that position before being able to progress through the court system. This requirement could make mediation/other dispute resolution seem more enticing and would encourage the parties to think seriously about non-court resolution before positions are more entrenched.

    Additionally, a public awareness campaign that clearly sets out the dispute resolution routes available to couples and how to take those routes could attract more people to use these options. This, coupled with funded initial advice and signposting, may make it even less likely that court is viewed as the default system for resolving family disputes.

    Carrot or Stick?

    Although encouraging couples to use non-court dispute resolution processes is necessary to help each couple resolve their dispute in the best way that suits them, making it compulsory risks the process losing its effectiveness for some couples. Before the more drastic ‘stick’ approach is taken, which could serve to delay and worsen parties’ positions and relationship, it might be worth policy makers re-thinking their ‘carrots’ to bring more couples to resolve their issues on divorce/separation willingly, rather than being forced into it.

    Sotheby’s and Forsters – An Owner’s Guide to Art – Part 4

    Buying and owning art can be one of life’s greatest joys. But while the drive to own art is often fuelled by an emotional connection with a piece or the prospect of holding a lucrative investment, it is important for buyers and owners of art to keep their wits about them, from both a legal and practical perspective.

    Felix Hale (Sotheby’s Tax, Heritage and UK Museums Team) and Jo Thompson (Forsters LLP’s Art Group) aim to point those wanting to buy, sell, and hold works of art in the right direction. This five-part mini-series will cover the following key areas:

    1. Acquiring and selling art
    2. Transporting art
    3. Maintaining your collection
    4. Passing on your art collection to the next generation
    5. Art and philanthropy

    This piece is aimed primarily at private individuals with a UK tax exposure.

    Part 4 -Passing on your art to the next generation

    It is important that art is not seen as a “static” asset, even if a work or collection is a long-term hold. You should ensure that you have discussions with your family about the future of your collection. It is important to know whether your family wishes to keep specific artworks or a collection within the family or not. If your intention is to pass artwork to the next generation, make sure you do so in the most tax efficient way possible. Alternatively, if future generations do not want to keep and maintain the artwork or collection, you might decide to sell all or part of it to raise funds for other purposes. Agreeing a strategy in respect of an artwork or collection can help to reduce the chances of a destructive post-death dispute arising.

    No family situation or collection is ever quite the same, so it is certainly worth discussing your position with your advisors and putting appropriate long-term planning in place.

    Gifts to the next generation

    UK capital gains tax (CGT)

    If you are a UK resident and do not claim or are not eligible for the remittance basis of taxation, there may be CGT to pay if your artwork has increased in value between the date on which you acquired the work and the date on which you give it away. Currently, CGT is charged at 10% at the basic rate and 20% at the higher rate.

    Certain exemptions from CGT would be available on a gift to your children. For example, so-called ‘wasting assets’, which include clocks and watches, are exempt from CGT, as are any individual objects valued at £6,000 or less. In addition, each individual has an annual CGT-free allowance, which is currently £12,300 per year. This will be reduced to £6,000 for disposals made between 6 April 2023 and 5 April 2024 and to £3,000 for disposals made between 6 April 2024 and 5 April 2025.

    Any capital gains tax charge arising on the gift would be a “dry” charge, as the transaction would not provide you with any funds from which to pay the tax due, so it is important that you reserve sufficient funds for the purpose of footing the capital gains charge that will be due and reportable in your self-assessment UK tax return in the tax year after you transferred the asset.

    If you claim the remittance basis of taxation then it may be possible to gift free of tax if you make the gift outside the UK, if the intention is for the artwork to remain offshore. We recommend that if you claim the remittance basis of taxation and wish to transfer artwork, you should seek advice on the options available to you.

    A UK resident with tax exposure in other jurisdictions should be mindful of CGT liabilities that may arise in these jurisdictions as a result of the gift and whether any tax treaties between the UK and the jurisdiction in question would protect against the risk of double taxation.

    UK inheritance tax (IHT)

    You will have an IHT exposure if you are UK domiciled (broadly, you intend to remain in the UK permanently) or “deemed domiciled” in the UK for tax purposes (because you have been UK tax resident for 15 of the last 20 UK tax years). If you are not UK domiciled or deemed domiciled, then you will only be exposed to IHT to the extent that you hold assets that are situated in the UK. For more detail on this, please see Part 1 of this series or contact Forsters for more tailored advice.

    If you own an artwork or collection which has a significant IHT exposure, you may wish to contemplate making a lifetime gift of the work to the next generation to help mitigate the IHT exposure of your personal estate.

    Outright gifts

    Outright gifts to individuals do not attract IHT immediately. A gift of a piece of art to a child, for example, would be a “potentially exempt transfer”, meaning that the gift would be free of IHT, provided that the gift is absolute (in other words, you do not reserve a benefit in the artwork once the gift is made) and you survive seven years from the date on which the gift is made. If you died within this seven-year period, this would trigger a charge to inheritance tax at up to 40% of the value of the painting, subject to the availability of your inheritance tax-free allowance (“nil rate band”) of £325,000. If you survived beyond three years, the rate of IHT on the gift reduces, tapering to 0% if you survived the gift by the full seven years.

    You can also make gifts of £3,000 in each tax year, which will be exempt from IHT, even if you die within seven years. You can carry forward one year’s exemption, so if you did not make any gifts last tax year, then in this one, you could give away £6,000 without any IHT consequences.

    If you decide to make a gift, we recommend that the gift (including the date on which it is made) is formally recorded by deed. It avoids any argument about whether the recipient has taken physical ownership and the gift is therefore effective and it will be helpful for the executors of your estate to have this sort of documentation when it comes to administering your estate and working out the IHT due.

    Gifts to trusts

    A lifetime gift to a trust will, in many situations, attract an immediate charge of 20% to the extent that it exceeds the nil rate band. If you were to make a gift to a trust and then die within seven years, an IHT charge of an additional 20% could arise.

    If you decide to make any lifetime gifts, you may wish to consider obtaining insurance to cover the risk of the potential IHT exposure while the seven-year clock is ticking. This might be particularly important when it comes to making outright gifts to individuals, who will be primarily liable for meeting the IHT charge.

    Rental agreements

    To ensure that the seven-year clock starts ticking for IHT purposes, it is essential that the gift is absolute. However (and as is often the case), you may wish to keep enjoying those works of art on the walls (or your collection of furniture, books, ceramics, or anything else!). If so, you can consider entering into a gift and leaseback arrangement whereby you would make a gift of artwork to the next generation and then lease the artwork back from the recipient of the gift at a commercial rate.

    Rental arrangements can be an effective way of mitigating IHT and enabling you to continue to enjoy the item or work in question, but before one is entered into, it is important to consider the costs involved in valuing the objects and negotiating the rents. The rental arrangements also need to be in place consistently for seven years before the donor’s death and continue to reflect a market rent at any point in time during that period in order to eliminate completely any exposure to IHT. Clearly, then, the amount of rent that would need to be paid under a rental agreement should be compared against the IHT exposure.

    Where artwork is held in trust and enjoyed by a beneficiary of the trust, then in certain circumstances, rental agreements can help to ensure that adverse tax implications do not arise as a result of the benefit conferred on the beneficiary. For further guidance on this, please get in touch with Forsters, who can liaise with Sotheby’s regarding valuations and negotiation of a rental figure (either on behalf of the owner or the borrower).

    Artwork passing on death

    Succession

    The most effective way to ensure that your artwork ends up in the right place after your death is to put a will in place that governs the succession of your artwork (and, ideally, the rest of your personal estate).

    Those with assets in different jurisdictions should ensure that any wills address the succession of those assets according to the relevant local laws. Forsters would be happy to advise on this.

    Tax considerations

    As mentioned above, if you are UK domiciled IHT will be charged on your worldwide assets at 40% on your death, subject to the availability of your inheritance tax free allowance of £325,000 and applicable exemptions, such as the spouse exemption. If you are not UK domiciled, but die owning assets in the UK, these assets will be subject to IHT in the same way.

    Conditional Exemption

    In order to mitigate your inheritance tax liability, you may wish to take advantage of a tax incentive that exists in the UK for owners of important works of art. It is designed to indefinitely defer tax arising on ‘pre-eminent’ works in return for allowing a degree of public access to them.

    It is hard to overstate the importance of this scheme, which has been going strong since 1896 and is one of the main reasons why the UK has so many amazing objects and collections still in private hands but on public display. The scheme allows owners of ‘pre-eminent’ works of art and other objects (including land and buildings) to pass them down to the next generation and retain them in private ownership by conditionally exempting them from inheritance tax. In exchange, the owner agrees to grant public access to the object. Public access can be given to an object either by putting it on display in a house that is open to the public or placing it on loan at a UK museum. HMRC usually expect the object to be on public display for at least 28 days per year (25 days in Scotland) unless for example you are exempting archives or other manuscript material where public access can be given ‘by appointment’ only.

    To qualify as ‘pre-eminent’ the object must be considered of either national, scientific, historic, or artistic importance. Works of art and other objects don’t necessarily have to be of high value to meet this threshold. Exemption can also be claimed on groups of items or sometimes an entire collection. In certain cases, it is possible to exempt a collection that might not necessarily meet the pre-eminence threshold on the basis of their association with a particular historic building.

    If the owner no longer wants to put the object on public display or would like to sell the work, then the tax that would have been due becomes payable. If owners are contemplating selling an exempt object they should consider a ‘Private Treaty Sale’ to a qualifying UK museum as there can be significant tax advantages in doing so, as outlined in Part 5 (coming soon).

    How we can help…

    For further guidance on your UK residence or domicile status, or on the tax implications of making a gift or leaving a legacy in your will to the next generation, please get in touch with Forsters.

    Sotheby’s is delighted to discuss passing on your art collection to the next generation. Sotheby’s frequently assist owners with claims for Conditional Exemptions ranging from a single painting to large country house collections, advising on the likelihood of the work meeting the threshold required for exemption and providing supporting evidence for this. Forsters can advise on the associated tax reporting.

    In the next and final part of the mini-series, we will be looking at philanthropic initiatives relating to art, as well as the tax benefits that incentivise owners to take advantage of these.

    Felix Hale at Sothebys

    Felix Hale is a Deputy Director in Sotheby’s Tax, Heritage & UK Museums department. He works with some of the most significant estates and collections in the UK, working with clients on valuations, sales, offers in lieu of tax, and claims for Conditional Exemption. He is a member of PAIAM (Professional Advisors to the International Art Market, Vice-Chair of the next generation board) and a member of STEP (Society of Trust and Estate Practitioners).

    If you would like to contact Felix, you can email him on [email protected].

    Jo Thompson from Forsters

    Jo Thompson is an associate in Forsters’ Private Client team and part of Forsters’ Art and Cultural Property Group. She acts for UK and international clients, advising high net worth individuals, families, landed estates, family offices, trustees and beneficiaries on a range of estate, trust and tax planning matters. Her work includes succession planning for a number of living artists and advising on heritage property matters. She also acts for high net worth individuals and trustees holding significant art collections.

    If you would like to contact Jo, you can email her on [email protected].

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    Private Client Partners to attend STEP Cayman Conference 2023

    Private Client Partners, James Brockhurst and George Mitchell will be attending the STEP Cayman Conference 2023.

    James Brockhurst will also be speaking at the session entitled ‘Digital assets, artificial intelligence, and the tech world – challenges for trustees in the Cayman Islands’ alongside Petri Basson of Hash Data, Chris Duncan TEP of Carey Olsen and Zoe Wyatt of Andersen LLP.

    This international wealth structuring forum takes place from 19-20 January and aims to explore a range of topical issues pertinent to the trust industry with a special focus on wealth structuring.

    You can find out more about the event and register here.

    The role of grandparents: Ellen Jones writes for Family Law Journal

    Family Trainee Solicitor, Ellen Jones, has authored an article for the Family Law Journal entitled ‘The role of grandparents’.

    Many grandparents play important roles in the lives of their grandchildren, often devoting significant amounts of time and financial resources to their grandchildren’s upbringing. However, irrespective of the commitments grandparents make, they do not have an automatic right to have contact with their grandchildren. Ellen addresses various topics including the definition of ‘grandparent’, the obligations of grandparents, what happens if a grandparent is denied contact with their grandchild and what would happen if a parent dies.

    Reference to the full article can be found below:

    Family Law (journal) > 2022 > December > In Practice > The role of grandparents – [2022] Fam Law 1548 (behind a paywall)

    For further information on this topic, please contact our Family team.

    Mind The Step: Simon Blain and Ellen Jones write for Family Law Journal

    Family Partner, Simon Blain, and Family Trainee Solicitor, Ellen Jones, have authored an article for the Family Law Journal entitled ‘Mind The Step: rights and obligations of the step-parent.

    Despite step-parents being a common feature in modern families, their rights, obligations and legal relationship with the children of the family are often misunderstood. Simon and Ellen discuss various elements including who constitutes a step-parent, whether then can acquire PR, what happens if a step-parent dies and what happens if a parent and step-parent separate.

    Reference to the full article can be found below:

    Family Law (journal) > 2022 > November > In Practice > Mind The Step: rights and obligations of the step-parent – [2022] Fam Law 1422 (behind a paywall)

    For further information on this topic, please contact our Family team.

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    Historic Buildings

    Historic England’s General Counsel, Andrew Wiseman and Commercial Real Estate partner Victoria Towers join host Miri Stickland to unpick what a historic building is and how can they be developed and adapted for future generations, with a particular eye on the challenges around introducing energy efficiency measures into historic buildings.

    In this episode we were joined by:

    Listen to more episodes and subscribe

    You can listen to more episodes of the More Than Law podcast here on our website, as well as subscribe on your favourite podcast services, including SoundCloud, iTunes/Apple Podcasts, Spotify, Stitcher.

    To continue the conversation on social media, use #MoreThanLawPodcast.

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    Sotheby’s and Forsters – An Owner’s Guide to Art – Part 3

    Buying and owning art can be one of life’s greatest joys. But while the drive to own art is often fuelled by an emotional connection with a piece or the prospect of holding a lucrative investment, it is important for buyers and owners of art to keep their wits about them, from both a legal and practical perspective.

    Felix Hale (Sotheby’s Tax, Heritage and UK Museums Team) and Jo Thompson (Forsters LLP’s Art Group) aim to point those wanting to buy, sell, and hold works of art in the right direction. This five-part mini-series will cover the following key areas:

    1. Acquiring and selling art
    2. Transporting art
    3. Maintaining your collection
    4. Passing on your art collection to the next generation
    5. Art and philanthropy

    Part 3 – Maintaining Your Collection

    This part of the mini-series is designed to equip you with practical tips on how to maintain, insure, and keep track of the works of art in your collection.

    Insurance

    Insurance values should be reviewed regularly to avoid either underinsuring your collection or paying premiums that are too high. Generally, we recommend updating insurance values every 5 years or so. Depending on the nature of your collection, you may want to consider a specialist art insurer.

    If you would like to discuss a valuation, please get in touch with Sotheby’s.

    Inventories

    If you have a large collection, you might want to consider managing it using collection management software such as ‘Collector Systems’. This is a useful way to monitor your collection as it enables you to store information regarding the purchase (invoices etc.), insurance and valuations, as well as up-to-date records on the condition and maintenance of works. Reviewing the collection every few years is important to keep track of works that are damaged, lost, or stolen, especially if any of the works are conditionally exempt from inheritance tax (where their loss would trigger a substantial charge).

    Environment

    Although it is often impossible to try to replicate museum-like environments in your home, there are some simple things to consider to keep your collection in good condition.

    Ideally, you should try to maintain a stable temperature and humidity in the rooms housing your collection. Some items, such as watercolours, are particularly sensitive to light, so you should try to reduce the amount of direct sunlight these works get and consider either rotating your displays and/or protecting works with UV resistant glass.

    As part of a collections review or valuation, Sotheby’s would be delighted to discuss any concerns you might have about how your collection is being maintained and displayed. General guidance can also be obtained from the English Heritage website.

    If a work of art is particularly difficult to display in your home, you may want to think about keeping it in specialised fine art storage or lending the work to a museum.

    Loans

    You may wish to consider lending pieces from your collection to a museum, either for an exhibition or on a long-term basis. A loan to an important museum has the potential to increase a work’s value: its display is testament to its art-historical significance and can bring the work to wider international attention. Sotheby’s is able to draw on its global network of museum contacts to help you find the most suitable museum in which to display your work of art.

    Regardless of the duration of the loan, it should always be underpinned by a loan agreement. In particular, this agreement should set out which party is responsible for insurance, the costs of transport, and any other conditions for display. Usually, under the terms of a loan agreement the museum will be responsible for insuring the work, whether that is with a commercial insurer, or more commonly, with the government backed Government Indemnity Scheme (GIS), which provides owners with ‘nail to nail cover’, including when the work is being transported to and from the museum. Forsters can assist you with negotiating the terms of a loan agreement.

    Holding vehicle

    If an individual is UK resident but non-UK domiciled, and holding art in the UK, it may be worth considering holding the art via an offshore structure, such as a company, so as to shield the artwork from UK inheritance tax. This is particularly the case if the intention is for the artwork to be a long-term hold. There may, in addition, be succession considerations, for example, staying outside of certain succession and tax regimes, that point toward ownership through a trust. Matters regarding succession will be considered in further detail in Part 4.

    If the intention is to hold art in an offshore structure (be it a company and/or a trust), then the tax implications of the transfer to the structure need to be considered (for this reason, and as outlined in Part 1, it is preferable to think about the asset’s use and future before going ahead with the original purchase, so that the structure is right from the outset). There are also other considerations that come into play here, which relate to the ongoing management and use of the offshore structure. If you would like advice on the most effective way to hold your artwork, both from a tax and succession perspective, please contact Forsters.

    In the next part of the mini-series, we will be looking at the implications of passing on your art to the next generation.

    Felix Hale at Sothebys

    Felix Hale is a Deputy Director in Sotheby’s Tax, Heritage & UK Museums department. He works with some of the most significant estates and collections in the UK, working with clients on valuations, sales, offers in lieu of tax, and claims for Conditional Exemption. He is a member of PAIAM (Professional Advisors to the International Art Market, Vice-Chair of the next generation board) and a member of STEP (Society of Trust and Estate Practitioners).

    If you would like to contact Felix, you can email him on [email protected].

    Jo Thompson from Forsters

    Jo Thompson is an associate in Forsters’ Private Client team and part of Forsters’ Art and Cultural Property Group. She acts for UK and international clients, advising high net worth individuals, families, landed estates, family offices, trustees and beneficiaries on a range of estate, trust and tax planning matters. Her work includes succession planning for a number of living artists and advising on heritage property matters. She also acts for high net worth individuals and trustees holding significant art collections.

    If you would like to contact Jo, you can email her on [email protected].

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    STEP honours exceptional service with Emeritus membership for Nick Jacob

    Private Client partner, Nick Jacob, TEP and former worldwide STEP Deputy Chair, has been honoured as an Emeritus member of the global professional membership body.

    This prestigious membership is awarded in recognition of ‘exceptional service and of eminence within STEP itself, at the highest global level’ for a full Member of STEP who has made a significant and high-level contribution across the organisation.

    By way of response, Nick said: “I am deeply honoured to have been appointed an Emeritus Member of STEP; it means an enormous amount to me. It has been wonderful to be a part of its growth and development from day one in 1991. Nobody would have believed then that it would become what it is today.”

    Nick is a Partner in our Private Client team. He advises on sophisticated private wealth planning, family succession plans, protection of the family business and avoidance of family disputes, and all aspects of international family governance.

    He is a trusted adviser to a number of globally significant families with a particular focus on acting for families in Asia and is well recognised for his understanding of family governance psychology.

    Click here to find out more about Nick’s practice.

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    Ten Forsters lawyers featured in Legal Week’s most recent Private Client Global Elite Directory

    Ten of Forsters’ Private Wealth team have been featured in Legal Week’s 2022 Private Client Global Elite directory, four of whom are recognised as Rising Leaders.

    Launched in 2017, the esteemed Global Elite Directory lists the world’s most respected lawyers advising High Net Worth clients, as nominated by peers within the private wealth industry.

    The list of over 6,000 nominations each year is whittled down to just 250 industry experts.

    This continued recognition of lawyers from across our Private Wealth practice is ongoing testament to the strength and breadth of services we provide to private clients.

    Private Client Global Elite

    Rising leaders

    An expert’s guide to…Women and Estate Planning – Rebecca Meade speaks to the Dura Society

    Abstract Real Estate

    Trusts and Estates (TTE) Senior Associate, Rebecca Meade, writes for The Dura Society and shares steps to take best advantage of her estate planning advice.

    Did you know that, statistically speaking, women are more exposed to inheritance tax (“IHT”) than men?

    This may be in part because women have a higher life expectancy and are, therefore, more likely to accumulate wealth.

    It may also be because, according to a report published by the Office for National Statistics, despite usually being the ‘planning’ sex, 53% of women actually have no estate planning in place to ensure that their wish that assets pass to loved ones is fulfilled.

    Compare this to 41% of men who say the same.

    You can read the full article here.

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    Forsters wins Family Business Advisory Practice of the Year at the STEP Private Client Awards 2022

    We are delighted that Forsters has been named Family Business Advisory Practice of the Year at this year’s STEP Private Client Awards.

    The award reflects the pre-eminent reputation of the firm’s private client group for its advice to ultra-high net worth families on the successful transition of wealth from one generation to the next. The judges were particularly impressed by the firm’s focus on psychology and family dynamics when advising on governance matters.

    Head of Private Client, Xavier Nicholas, comments: ‘We are extremely pleased to have been recognised by STEP for our expertise in advising clients on the establishment of family offices, family governance, and dynastic planning. This area of our practice continues to grow, owing to our reputation in the field and the demand for advice on wealth preservation that goes beyond the establishment of traditional asset holding structures.’

    Xavier Nicholas
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    Sotheby’s and Forsters – An Owner’s Guide to Art – Part 2

    Buying and owning art can be one of life’s greatest joys. But while the drive to own art is often fuelled by an emotional connection with a piece or the prospect of holding a lucrative investment, it is important for buyers and owners of art to keep their wits about them, from both a legal and practical perspective.

    Felix Hale (Sotheby’s Tax, Heritage and UK Museums Team) and Jo Thompson (Forsters LLP’s Art Group) aim to point those wanting to buy, sell, and hold works of art in the right direction. This five-part mini-series will cover the following key areas:

    1. Acquiring and selling art
    2. Transporting art
    3. Maintaining your collection
    4. Passing on your art collection to the next generation
    5. Art and philanthropy

    Part 2 – Transporting art

    If you wish to transfer artwork from the UK to another jurisdiction, you will need to comply with any applicable export reporting obligations and tax payments under UK rules and any import payment or reporting obligations in the jurisdiction of entry. Similarly, if you wish to bring artwork into the UK, you will likely have an exposure to UK VAT. This article outlines the applicable restrictions and rules in the UK and aims to provide practical tips for the transportation process.

    Export considerations

    Licences

    Since the Second World War, the UK has exercised various export controls for works of art and other historical objects.

    Broadly, where a work has been in the UK for less than 50 years one applies for an Open General Export Licence (Objects of Cultural Interest) which permits permanent export to any destination (save for embargoed ones) of works that do not exceed the age and value thresholds outlined below. Works of art that have been in the UK for more than 50 years and that meet a monetary value threshold (which can be fairly modest) require an individual export licence in order to be exported from the UK.

    The process of applying for an export licence is as follows. You make an application (which contains details of the full provenance and ownership history of the artwork) to Arts Council England, who refer the work to an Expert Advisor. If the Expert Advisor objects to the export of the artwork, then the case is considered by the Reviewing Committee on the Export of Works of Art (RCEWA), who determine whether the work is a ‘national treasure’ on the basis that its departure from the UK will be a misfortune on one or more of the following three grounds (called the ‘Waverley Criteria’):

    1. The work is closely connected to UK history and national life;
    2. The work is of outstanding aesthetic importance; or
    3. The work is of outstanding significance for the study of some particular branch of art, learning or history.

    If the committee finds that the object meets one of the above criteria, a deferral period (called the ‘first deferral period’) is imposed to allow a UK purchaser (almost always a UK museum or gallery) a chance to express a serious intention to match the sale price (or an agreed value if no sale has taken place) and acquire the work of art. If a UK purchaser expresses a serious interest to acquire the work during this first deferral period, another deferral period (the ‘second deferral period) is imposed, giving the acquiring institution a chance to raise the funds necessary to purchase the work.

    The export reviewing process can take up to a year to complete. Cases are heard by the reviewing committee normally within two or three months following the receipt of the objection to the export. The first deferral period typically runs for a period of between two and four months. The second deferral period typically lasts a maximum of six months, although if an object is exceptionally valuable the committee has discretion to impose an even longer deferral period to allow a UK purchaser to fundraise.

    If no UK purchaser shows a serious intention to purchase a work by the end of the first deferral period however, the export licence is granted at that point. Similarly, if the potential UK purchaser fails to raise the necessary funds by the end of the second deferral period, the export licence is granted.

    Often the export licencing process occurs when a work of art is sold in the UK and acquired by a foreign buyer who then wants to export their object. If the seller remains the owner (because the buyer hasn’t yet paid) the ‘matching offer price’ is the amount the seller would have received had the work been sold to the foreign buyer. If the buyer is the owner (because they have paid for the item) the matching offer amount is the amount they paid for it. If you are a buyer who intends on exporting a work that has been in the UK for over 50 years, you may wish to defer payment until an export licence has been granted. This is something that would need to be agreed with Sotheby’s prior to the sale.

    The system in place tries to strike a balance between enabling a thriving art market, where buyers are able to purchase with confidence, and protecting the UK national heritage. Only a small number of items each year are referred to the Review Committee, and in even fewer cases are funds-raised successfully. Sotheby’s frequently represents clients whose objects have been referred to the Committee.

    Currency fluctuations

    Although the UK export licence applications are made in GBP, a foreign buyer may well have paid for the artwork in another currency. The export licence process can be lengthy, and currency fluctuations during that time can be a real concern to buyers. Since 2021, buyers who have paid in non-Sterling currencies can choose for the ‘matching offer price’ to be paid with the currency conversion as at one of the following three dates:

    1. The date of the original sale;
    2. The date of the export licence application; or
    3. The date of the Reviewing Committee hearing.

    Import considerations

    If you wish to bring art into the UK, the import will generally be subject to a VAT charge of 5%. In order to benefit from this lower rate of VAT, the art will need to meet certain conditions and have the correct commodity code. There is generally no customs duty charged on imports of mainstream categories of art, for example, original oil paintings or pencil drawings.

    Make sure that you have complied with any exporting obligations in the jurisdiction from which the artwork is being imported!

    Practical considerations

    We strongly recommend that your work is properly insured from the moment it is taken off the wall and placed onto a new one. In particular, we would recommend using a specialist fine art shipper for fragile pieces.

    Sotheby’s can advise on shipping and arrange expert delivery of your works of art worldwide when either importing goods before a sale or arranging shipping and exporting on completion of a sale. Sotheby’s would be happy to speak to you about moving your art safely.

    For any guidance on the import or export of artwork, please contact Forsters or Sotheby’s. In the next part of this mini-series, we will be looking at practical tips on how to maintain, insure and keep track of your artwork.

    Please note that this briefing offers general guidance on the transportation of artwork. The circumstances of each case vary, and this note should not be relied upon in place of specific legal advice.

    Felix Hale at Sothebys

    Felix Hale is a Deputy Director in Sotheby’s Tax, Heritage & UK Museums department. He works with some of the most significant estates and collections in the UK, working with clients on valuations, sales, offers in lieu of tax, and claims for Conditional Exemption. He is a member of PAIAM (Professional Advisors to the International Art Market, Vice-Chair of the next generation board) and a member of STEP (Society of Trust and Estate Practitioners).

    If you would like to contact Felix, you can email him on [email protected].

    Jo Thompson from Forsters

    Jo Thompson is an associate in Forsters’ Private Client team and part of Forsters’ Art and Cultural Property Group. She acts for UK and international clients, advising high net worth individuals, families, landed estates, family offices, trustees and beneficiaries on a range of estate, trust and tax planning matters. Her work includes succession planning for a number of living artists and advising on heritage property matters. She also acts for high net worth individuals and trustees holding significant art collections.

    If you would like to contact Jo, you can email her on [email protected].

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    Sotheby’s and Forsters – An Owner’s Guide to Art – Part 1

    Buying and owning art can be one of life’s greatest joys. But while the drive to own art is often fuelled by an emotional connection with a piece or the prospect of holding a lucrative investment, it is important for buyers and owners of art to keep their wits about them, from both a legal and practical perspective.

    Felix Hale (Sotheby’s Tax, Heritage and UK Museums Team) and Jo Thompson (Forsters LLP) aim to point those wanting to buy, sell, and hold works of art in the right direction. This five-part mini-series will cover the following key areas:

    1. Acquiring and selling art;
    2. Transporting art;
    3. Maintaining your collection;
    4. Passing on your art collection to the next generation; and
    5. Art and philanthropy.

    This piece is aimed primarily at private individuals with a UK tax exposure.

    1 – Acquiring and Selling Art

    Acquiring and selling art can often be an intimidating prospect, particularly for a first-time buyer or seller. Even well-versed art collectors can find the process hard to navigate.

    In Part 1, we highlight key points that you may wish to consider when it comes to acquiring and selling art for personal use, either privately or by auction.

    A. Acquiring Art

    Before taking the plunge and deciding to bid on a work of art at auction it is important to do your homework; you might wish to research the artist and the provenance and look back at some past sales. Try to see the artwork in person, even if the sale is online. Look carefully at the Auction catalogue (which nowadays is usually found online) and check if the lot is marked with any symbols as these may provide important information relating to, for example, VAT, Artist’s Resale Rights, and any export restrictions. Do get in touch with Sotheby’s if you have any questions or would like to see a condition report for the piece.

    Buyers should be aware that auction houses will charge a ‘Buyer’s Premium’ to purchasers at auction, which is an amount over and above the ‘hammer price’ the auctioneer sells the work for. The rate of Buyer’s Premium will be listed on the auction house’s website or in the auction catalogue.

    If you are buying a work of art through a private sale, make sure you read the sale contract carefully in order to understand all of the costs, logistics and other terms associated with the sale. For further help with this, please get in touch with Forsters.

    Once you have made a purchase, we recommend that you safely store all the paperwork associated with that purchase. It will come in handy if you decide to sell or make a gift of the work in the future and your accountants will thank you for the additional information when it comes to calculating any tax liabilities arising as a result of the purchase or future transfer of the work.

    Funding the purchase – tax considerations

    VAT

    Generally speaking, and with some exceptions, the purchase of a work of art in the UK for personal use is subject to VAT at the standard rate of 20%, even if the artwork is exported from the UK shortly after. VAT should not be applicable if the seller is not subject to VAT.

    Works of art are often sold through what is known as the ‘margin scheme’, where VAT on second-hand goods is charged on the Buyer’s Premium element only. This means that the VAT arising on the purchase is assessed on the difference between the price the work was last sold for and the current sale price, as opposed to the entire sale price.

    VAT, which is collected by the auction house or other seller alongside payment for the work, is the responsibility of the buyer, so it is best to check what the VAT liability will be and take this into consideration when gathering the funds for your art purchase. If you are buying the artwork for personal and private use, you are unlikely to be able to recover the VAT.

    Considerations for non-UK domiciled purchasers who are resident in the UK

    Private individuals will have a UK tax exposure if they are (1) UK domiciled and/or UK resident or (2) not UK domiciled or not UK resident, but hold UK situs assets. Broadly, an individual will be domiciled in the UK if they intend to remain in the UK permanently or they have left the UK but not formed the intention to permanently reside in another jurisdiction. They will be “deemed domiciled” for UK tax purposes if they have been a UK tax resident for 15 of the last 20 UK tax years. The number of days an individual spends in the UK and the extent of the ties they have with the UK will determine whether they are UK tax resident. For further guidance on your UK residence or domicile status, please contact Forsters.

    If you are UK resident but non-UK domiciled, be wary of using untaxed foreign income and gains to acquire a piece of art which is in the UK. Doing so will constitute a taxable remittance of those funds, even if the funds are not transferred to a UK bank account. This could result in a UK tax liability of up to 45% on the purchase price!

    Ideally, a buyer in this position should purchase the art using ‘clean capital’ – essentially any funds which will not be taxed in the UK, even if remitted. However, if it is necessary to use foreign income or gains to fund the acquisition, then completion of the purchase (i.e. payment and delivery to the purchaser) should not occur until the piece of art has been removed from the UK, with the seller retaining title to the artwork until that time. The sale and purchase agreement should be tailored accordingly to set out these conditions for sale. Forsters would be happy to advise on this.

    Choosing the right purchaser

    As with the acquisition of any asset, it is helpful to think about the artwork’s use and future before buying it, as this will help to determine the most suitable purchaser, whether it be an individual, company or other entity. Although the ownership structure can be changed, it is preferable to get the structure right from the outset.

    Deciding whether an individual, company or other entity should buy the artwork will depend on the context and should be considered on a case by case basis. For example, if an individual is UK resident but non-UK domiciled and purchasing art in the UK, it might be worth considering the purchase of the art via an offshore structure, so as to shield the artwork from UK inheritance tax. This is particularly the case if the intention is for the artwork to be a long-term hold. If you would like advice on how you might acquire and hold artwork, please contact Forsters.

    B. Sale of Art

    Finding the right forum

    Finding the right sale forum is key to ensuring a successful sale of artwork. Usually, the decision as to whether or not a work should be sold at auction or through a private sale will depend on the nature of the work and your circumstances as seller.

    Although Sotheby’s is probably best known for selling works of art at auction, it is also the largest private dealer in the secondary market, making it well-equipped to advise sellers wishing to pursue either sale route.

    There are many different factors that should be taken into account when weighing up whether to take the auction or private sale route. These include the type and value of the work, the pool of potential buyers, and how urgently funds from the sale are required.

    Offering works privately allows you to sell more discreetly and can give peace of mind by agreeing a fixed price. If funds need to be raised quickly and the next appropriate auction date is too far away, a private sale may be the most suitable option.

    There may also be significant tax advantages in selling a work of art privately to certain UK museums or institutions (this will be covered in further detail in Part 5).

    On the other hand, auction sales give the work the greatest exposure to potential buyers and the final purchase price is, in theory, limitless! It is important to liaise with the auction house to set attractive and realistic reserve prices and auction estimates before the sale to give your work of art the best chance of success.

    To discuss the most appropriate sale route for your work of art, please contact Sotheby’s.

    Tax implications

    If you are a UK resident and do not claim, or are not eligible for, the remittance basis of taxation, there may be UK capital gains tax (CGT) to pay if your artwork has increased in value between the date you acquired it and the date of sale. Currently, CGT is charged at 10% at the basic rate and 20% at the higher rate.

    Certain exemptions from CGT are available. For example, so-called ‘wasting assets’, which include clocks and watches, are exempt from CGT, as are individual objects sold for £6,000 or less. Be wary when it comes to selling items that are part of a set: you will only benefit from the CGT exemption if you sell all or part of the set for less than £6,000, or if you sell parts of the set to different people, with each part being sold for £6,000 or less.

    In addition, each individual has an annual CGT-free allowance, which is currently £12,300 per year (although note that this will reduce to £6,000 from April 2023). If a work is being sold by more than one person jointly, then the individuals’ annual CGT allowances can be combined. If you are married, you might consider giving half of the artwork to your spouse before the sale (a transfer which will usually be exempt from both CGT and inheritance tax) and selling the artwork jointly to benefit from your combined annual CGT allowances. Please note that if the spouses do not share the same domicile, there could be an inheritance tax issue, so ensure advice is taken before any planning of this nature is carried out.

    A UK resident with tax exposure in other jurisdictions should be mindful of liabilities on capital gains that may arise in those jurisdictions as a result of the sale and should consider whether any tax treaties between the UK and the jurisdiction in question would protect against the risk of double taxation. Please contact Forsters if you would like some further advice in relation to tax implications of selling your artwork.

    In the next part of this mini-series, we will be considering the implications of owners transporting their art to or from the UK.

    Please note that this briefing offers general guidance on the acquisition and sale of artwork. The circumstances of each case vary, and this note should not be relied upon in place of specific legal advice.

    Felix Hale at Sothebys

    Felix Hale is a Deputy Director in Sotheby’s Tax, Heritage & UK Museums department. He works with some of the most significant estates and collections in the UK, working with clients on valuations, sales, offers in lieu of tax, and claims for Conditional Exemption. He is a member of PAIAM (Professional Advisors to the International Art Market, Vice-Chair of the next generation board) and a member of STEP (Society of Trust and Estate Practitioners).

    If you would like to contact Felix, you can email him on [email protected].

    Jo Thompson from Forsters

    Jo Thompson is an associate in Forsters’ Private Client team and part of Forsters’ Art and Cultural Property Group. She acts for UK and international clients, advising high net worth individuals, families, landed estates, family offices, trustees and beneficiaries on a range of estate, trust and tax planning matters. Her work includes succession planning for a number of living artists and advising on heritage property matters. She also acts for high net worth individuals and trustees holding significant art collections.

    If you would like to contact Jo, you can email her on [email protected].

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    Hannah Mantle to speak at Trust & Estates Litigation Forum 2022

    Contentious Trusts and Estates Senior Associate, Hannah Mantle, has been invited to speak at the Private Client Global Elite Trust and Estates Litigation Forum 2022.

    Hannah will be speaking at the session entitled ‘Risky Business: Investment Management Claims’ alongside Tamasin Perkins of Charles Russell Speechlys and Christian Hay of Collas Crill.

    This annual forum, taking place from 30 November to 2 December, brings together trust and estate litigators to connect and discuss recent contentious trust proceedings and developments from around the globe.

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    Maryam Oghanna to speak at Annual Bar & Young Bar Conference 2022

    Contentious Trusts and Estates Senior Associate, Maryam Oghanna, has been invited to speak at the Annual Bar and Young Bar Conference 2022: Future-proofing the Bar.

    This annual conference takes place over four days and will explore the deep rooted issues that underpin the justice system and their impact on the providers of legal services today.

    Maryam will be speaking at the session entitled ‘Predicting industry trends and creating a financially sustainable chambers’ alongside chair Fiona Fitzgerald of Radcliffe Chambers and other industry experts.

    The conference will take place from 23-26 November. You can view the full agenda and register to attend here.

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    Emma Gillies to speak at Transatlantic Wealth & Estate Planning conference

    Working on laptop

    Private Client Partner, Emma Gillies, has been invited to speak at the Informa Connect Transatlantic Wealth & Estate Planning conference.This London conference features US and UK tax experts as well as specialists in immigration and wealth management, and is designed to provide full coverage of the transatlantic tax ecosystem. Emma will be speaking at the session entitled ‘Estate Planning and Charitable Giving’ alongside Jaime McLemore of Withers and Jo Crome of CAF American Donor Fund.

    The conference will take place on 30 November. You can view the full agenda and register to attend here.

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    Charlotte Evans-Tipping to speak at ThoughtLeaders4: Wealth/Life Middle East conference

    Private Client Senior Associate, Charlotte Evans-Tipping, has been invited to speak at the ThoughtLeaders4: Wealth/Life Middle East Conference.

    This exclusive event for international private client advisors has been curated ‘by the experts for the experts’ and will span across two days. Charlotte will be speaking at the session entitled ‘Working with Family Offices: Should you have one? Setting One Up? Client, Obstacle or Threat?’ alongside Krya Motley of Boodle Hatfield and Sally Tennant OBE of Acorn Capital Advisors.

    The conference will take place from 15 to 17 November 2022. You can view the full agenda, and register to attend here.

    Charlotte Evans-Tipping
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    Forsters maintains Tier 1 ranking in eprivateclient’s Top Law Firms 2022

    We are pleased to have once again been recognised as a Tier 1 firm in eprivateclient’s ‘Top Law Firms’, a ranking of top private client law firms in the UK.

    The firm’s top-tier position reflects the quality and breadth of its private client practice and the excellence of its lawyers. It is a well-deserved reward for the hard work of the team.

    Click here to view the 2022 eprivateclient rankings (behind a paywall).

    Emily Exton
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    Considerations for parents of children with additional needs who are separating: Rosie Schumm writes for Able Magazine

    Family Partner, Rosie Schumm, has authored an article in Able magazine entitled ‘Considerations for parents of children with additional needs who are separating’.

    The impact of divorce or separation on a family with a child with additional needs can be profound. Rosie discusses various factors involved including financial provisions, the educational needs of the child, social issues and living arrangements and emotional wellbeing.

    The full article can be read here (p34-35).

    For further information on this topic, please contact our Family Team.

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    Divorce applications reach decade high: Simon Blain provides comment

    Simon Blain, Partner in the Family team, has provided comment in a number of news outlets on the rise in divorce applications following the introduction of the no-fault divorce legislation.

    Divorce applications are at the highest level for a decade to which Simon comments “Time will tell whether the increase is sustained, which would suggest that, as some feared, a simplified, online, divorce procedure will lead to higher levels of divorce.

    Much more likely is that a combination of a return to normal following the pandemic and well-publicised and popular new legislation meant that people waited for the new legislation before commencing divorce proceedings, leading to a spike as this pent-up demand was released after 6 April.

    If that premise is correct, one would expect to see levels of new divorce applications returning to normal over the next two to three quarters.”

    The full articles can be read using the below links (some behind a paywall):

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    Innovations in Art – a video mini-series with Smartify

    Forsters’ Art and Cultural Property team with Private Client Partner, Catherine Hill launch ‘Innovations in Art’ together with Smartify – the world’s most downloaded museum app.

    ‘Innovations in Art’, a mini-series of videos, features specialist artists and their works, to help demonstrate innovations in the art world and their relevance today.

    We explore evolution in the creative process, ownership and sale of art works and restoration techniques, demonstrating the value of art as a record of our shared cultural history.

    In the name of art and from art lovers Forsters and Smartify, watch the first in our mini-series of short videos about art – starting with ‘Innovations in the Art World – changes in the creation of art’.

    Changes in the Creation of Art

    How did art begin? From 70,000-year old cave paintings using soil, burnt charcoal and chalk to today’s mixing of bright and wonderfully-rich pigments, you’ll hear more about how innovations in art have helped to turn the world technicolour.

    From Da Vinci and Vermeer, using science, maths, and now high-tech solutions, digital art and NFTs – see how the art world has progressed and hear from modern day experts including Richard Deacon RA – award winning abstract sculptor.

    Experience and enjoyment

    Why is art inseparable from life? It’s embedded in our need to tell stories, to inspire and to provoke us into thinking. George Sand said it’s meaningless without an audience and that the sale and enjoyment of art is as important as the art itself.

    Watch our video to travel down the ages from the paintings of Gainsborough to commentary from modern-day sculptor Richard Hudson, and discover how art in the public eye has developed from portraits of the individual (the figurative), to the abstract, taking on different shapes and forms;an interesting reflection of the times we live in.

    Innovations in conservation and preservation in art

    Why do people vandalise art? Did you know that the Mona Lisa has been damaged five times, and that Rembrandt’s Nightwatch was attacked with acid and a knife? We ask what drives this and what innovations we see in our restoration techniques used to conserve our masterpieces and enjoy them today?

    Up to date techniques including imaging, high resolution photography, analysis and AI all help to establish what was missing from damaged artworks for future generations. Kalliopi Lemos, sculptor, painter and installation artist give her insight into the importance of choosing the right materials when we produce art.

    How does Smartify work?

    Smartify is a free app that allows you to explore the artworld virtually, taking digital tours or using it to find works on show at home and abroad. It can scan artworks in order to not only identify them but also to access instant art commentary on your mobile device. It makes artwork accessible for a global audience through innovative technology and engaging storytelling. Smartify was founded in 2015 and now works with over 150 museums, galleries and historic houses worldwide, delivering information about opening hours and what’s on locally and internationally and providing audio and visual guided tours of venues, and information about individual artworks and artists at the click of a button.

    View the mini-series ‘Innovations in Art’ on Smartify

    About our team

    Against this backdrop, Catherine Hill and her team aim to demonstrate both their collective and individual love of art that translates into ongoing work at Forsters, helping to promote the private client and wider specialist services that Forsters provides to living artists.

    The team provides a full range of services for artists in order to help maximise the value of their art and, in the long-term, build an enduring legacy.

    Services include:

    • Tax efficient structuring of the artist’s business
    • Advising on contractual relationships with galleries, museums and other institutions
    • Advising on employment of interns, studio assistants and managers, curators and archivists
    • Supporting the management of an artist’s archive
    • Advising on intellectual property rights and royalties for protection of the artist’s work
    • Tax advice and support
    • Preparing Wills and structuring foundations and alternative entities for legacy planning purposes

    Forsters’ Private Wealth practice is top [Band 1] ranked in the latest edition of The Chambers HNW Guide.

    Further information on our Art and Cultural Property Group’s specialist expertise can be found here.


    “Follow the paint” on a unique tour of artist Jock McFadyen’s studio whilst he reveals the mastery behind his paintings and artistic legacy

    Forsters’ Head of Art and Cultural Property, Catherine Hill, joins longstanding client Jock McFadyen at his artist studio in London Fields for a captivating conversation in which Jock reveals his painting techniques, reflects on a 50-year career and the challenges of accepting the kind of artist you’ve become, as well as musings on the future of the art market.

    a unique tour of artist Jock McFadyen's studio whilst he reveals the mastery behind his paintings and artistic legacy

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    The Register of Overseas Entities: how does it apply to trusts?

    The new register of overseas entities (“ROE”) maintained by Companies House came into effect on 1 August 2022. The aim of the ROE is to record the beneficial ownership through “overseas entities” of land in the UK. Non-compliance with registration obligations will in practice make it impossible for overseas entities to buy, sell, let or charge UK land and also carries criminal sanctions. It is therefore crucial that overseas entities, including corporate trustees, are aware of their obligations in relation to the ROE.


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    Download in PDF format


    Our briefing answers the following key questions:

    • What is the Register of Overseas Entities?
    • Which kinds of entities are required to register on the ROE?
    • What is a “Qualifying Estate?”
    • When must an Overseas Entity register on the ROE?
    • What information does the Overseas Entity have to provide to the ROE when registering?
    • What information on the ROE is publicly accessible?
    • Who are “Registrable Beneficial Owners”?
    • How does the new requirement to register on the ROE apply to trusts and their related entities?

    Read our full briefing here

    Dickon Ceadel and Maryam Oghanna listed in ePrivateClient’s Top 35 under 35 2022

    We are delighted to announce that Senior Associates Dickon Ceadel and Maryam Oghanna have been listed in ePrivateClient’s Top 35 under 35 2022.

    Once again, this is a testament to the talent and strength of our next generation of lawyers, together with Forsters’ commitment to nurturing and promoting the talent of our senior associates who are a key part of our continued growth as a firm.

    Eprivateclient’s Top 35 Under 35 initiative is designed to identify, recognise, promote and introduce the rising stars of the Private Client practitioner community in the UK.

    Dickon advises on all aspects of private family law, including divorce and separation, financial claims, pre – and post – nuptial agreements, cohabitation disputes, and all issues regarding private children law including surrogacy.

    Maryam is a Senior Associate in the Dispute Resolution team, specialising in disputes regarding Trusts and Estates. She advises on a broad spectrum of contentious trusts and estates matters at both domestic and international level and has represents a variety of clients across multiple jurisdictions.

    Congratulations!

    The full results can be viewed here.

    How divorce settlements are calculated and when is best to draw one up – Guy Mawson writes for ePrivateClient

    Family Senior Associate, Guy Mawson, has written for ePrivateClient on divorce settlements and when is best to draw one up.

    In the article, Guy discusses the principles that must be applied so that both spouses, or civil partners, receive a fair financial outcome.

    The article was first published on ePrivateClient on 30 August 2022, and is available to read in full here.

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    Family Governance as a Tool of Next Gen Wealth Planning in Asia – Patricia Boon writes for Thought Leaders 4

    Private Client Partner, Patricia Boon, has authored an article for Thought Leaders 4 on next gen wealth planning in Asia.

    The article was first published in Thought Leaders 4 Private Client Magazine ‘Next Gen Wealth’ in August 2022 and can be read in full below.

    It is well-documented that a good number of high-net worth Asian families are on the cusp of a very significant inter-generational transfer of wealth as, over the course of the next decade, we will see the ownership and stewardship of family wealth and family businesses pass from the hands of the wealth generators/creators of Generation 1 to Generations 2 and 3.

    The families standing at the precipice of this change will, in some cases, not yet have considered the implications of this inter-generational wealth transfer or, if they have, may be uncertain as to how to deal with them. Family businesses are at their most vulnerable at the point of this transition, particularly when the business founder/wealth creator is still the person at the helm. For such families, family governance planning can enable them to meet the challenges that this transition to the next generation poses.

    The main challenges facing families in this position are:

    • to ensure that the value that has been generated by Generation 1 can be preserved, grown, and perpetuated for the benefit of future generations and/or for philanthropic purposes; and
    • to equip the next generations to deal with the businesses, assets, or structures that have been passed on to them so as to avoid a diminution in the value of the business or dissipation of the wealth.

    There are further sub-sets of challenges within these categories, including the risk of inter-generational and cross-generational conflict, risks to family harmony as the number of family members grows and becomes more disparate, and the risk of divorce.

    If these challenges are to be navigated successfully, it is essential for Generation 1 to look carefully at how to involve Generations 2 and 3 in their succession planning and to obtain the next generation’s contribution and buy-in to the philosophy that will shape the family’s management of their businesses and assets for the medium to long-term. However, it is often difficult for Generation 1 to let go of the reins; of the respondents to the PwC Global NextGen Survey 2022, 45% said that they found it difficult to prove themselves as a new leader or board member in the business. In this context, family governance planning has an important role to play, as the implementation of a governance framework for families to manage succession to the business and/or control of family assets is a key way to involve the next gen today and to minimise the risk of dispute and wealth dissipation tomorrow.

    Using a Family Governance framework to involve the next gen

    The aim of any family governance strategy should be to ensure that there is a robust and flexible succession plan in place for Generations 2 and 3 (and beyond) to play their part as stewards of the family wealth and assets.

    Good communication is essential to mitigating the risk of disputes and conflict, as it encourages transparency, minimises suspicion, and offers the opportunity for the stakeholders to have their say.

    Where the family is at the start of the governance exercise, it may be helpful to have a third-party, such as the family’s trusted advisor, to co-ordinate the discussion process, meeting together and individually with Generation 1 and members of Generations 2 and 3. This is an important step to flush out areas of frustration, that are ripe to develop into points of conflict between the generations, so that these can be discussed and addressed openly at the outset. It is noteworthy that, in the studies looking at the difficulties inherent in inter-generational wealth transition, many next gens of business families who are surveyed cite their frustration that they are unable to have a voice. Consequently, open dialogue is a crucial part of allowing the next generation to feel involved and engaged.

    The creation of a family council can ensure that each family branch has a voice and representation. Where there are family trusts, the family council can act as an interface with the trustees, ensuring a regular flow of information to the family members. The family council can also act as a ‘training ground’ for the next gen, making clear the expectations there will be of any family member who wishes to work in the family business, any requirement to have undertaken particular work experience within or without the family business, and/or setting out criteria that must be met for a family member to be considered eligible to work in the business.

    A family council may also allow the next gen to:

    • observe the workings of the family council before assuming a formal role;
    • receive training in understanding the family business, responsibilities and duties of office-holders and shareholders, and financial statements.

    Such training can help to identify at an early stage the leaders of the future who have the relevant qualities and skills to contribute to the business.

    Where there are multiple shareholders, shareholders’ agreements are a valuable tool which can be used to educate the next generation in relation to shareholder co-operation. They are also useful for focusing the attention of Generation 1 as to whom shares should be transferred.

    The involvement of experienced and trusted non-family management and advisors has a role to play, as these individuals can offer objectivity and can act as a sounding board to the different generations, as well as assisting in the transition of Generation 1 out of day-today control into an ‘oversight’/advisory role.

    There is no ‘one size fits all’ solution to sorting out the myriad issues that business and wealth transfer will bring to the fore between family members.

    However, what is self-evident is that a failure to consider succession planning and the involvement of the next generation (and beyond) in a timely fashion will increase the risks of family conflict and fragmentation of wealth to the detriment of all of the family members.

    This makes it vital for wealth creators to recognise the value of involving the next generation in their succession plans early on, and to understand the means available to them to achieve this.

    Patricia Boon
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    Patricia Boon

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    Ready, Steady, (almost) GO! The Register of Overseas Entities is live

    The register of overseas entities managed by Companies House (the Register) is now live and accepting applications, but there is a short grace period until 5 September for the registration of land transactions. In this update we set out more detail as to the registration requirements and process and our thoughts as to what overseas entities should be doing now to ensure compliance.


    Download this briefing in PDF format

    Download in PDF format


    Background

    The English government has established the Register with the intention of increasing “transparency”, to allow “law enforcement agencies to investigate suspicious wealth more effectively”. Essentially, any overseas entity which owns or is to acquire UK property will need to register, providing details about the entity itself and its beneficial owners. HM Land Registry will enter restrictions against the title of such property so preventing the overseas entity from entering into various property-related transactions unless it is on the Register. Failure to comply with the requirements to apply to be on the Register can constitute an offence.

    Further detail about the Register and the obligations arising can be found in our earlier note on the topic (see our article here). Since that note’s publication, additional regulations have been published adding in extra layers of process.

    Key Dates

    The Register went live on Monday 1 August 2022, meaning that overseas entities can now apply to Companies House to be admitted to the Register.

    The property-related provisions will however, only take effect on 5 September 2022. This grace period has been implemented to avoid property transactions being held up by the need to register. Its effect is that any overseas entity currently in the middle of a property acquisition which completes and in respect of which the application to register the transaction at the Land Registry is made before 5 September will not need to be on the Register in order to complete and make the necessary entries at the Land Registry. However, any overseas entity which intends to complete the purchase of any UK property and to apply to register the transaction at the Land Registry on or shortly after 5 September would be wise to apply to the Register now to ensure that the registration process does not delay completion. As from 5 September 2022, overseas entities will not be able to register a freehold interest or a lease exceeding seven years from the date of grant unless they are registered on the Register at the time the (Land Registry) application is made.

    Any overseas entity which held UK property prior to 4 September 2022 will need to apply to register in any event by 31 January 2023 (i.e. six months from the Register going live). This registration obligation applies to overseas entities which became registered as proprietor of the UK property pursuant to an application to the Land Registry on or after 1 January 1999. However, bear in mind that where an overseas entity acquired UK property between 1 August 2022 and 4 September 2022, it will not be able to dispose of that property or grant a legal charge over it unless it is duly registered. (Overseas entities which acquired the UK property prior to 1 August 2022 will be able to make such a disposal without first being on the Register until 31 January 2023.)

    Any overseas entity which has made a disposition of UK property since 28 February 2022 must provide details to Companies House by 31 January 2023. Where the overseas entity is obliged to register (because it still owns UK property), the details of such disposition must be provided at the time of its application to register.

    UK-Regulated Agent

    To register, an overseas entity will need to provide certain information about itself and its beneficial owners (or if there are no beneficial owners, its managing officers) to Companies House. Pursuant to regulations published earlier in the summer, such information must first be verified by a “UK-regulated agent”. Registration will not be possible without this verification from a UK-regulated agent. The information must be verified not more than three months before the application to register is sent to Companies House.

    Service providers such as accountancy firms and law firms are among those who may apply to become a UK-regulated agent but obviously, there are responsibilities, risks and potential liabilities which also come with the position. It is to be hoped that a publicly available list of such agents will become available in due course. The verification process is not exactly aligned with the requirements of anti-money laundering regulations, so overseas entities may find they are required to provide more detailed information than is ordinarily required for transactions.

    The UK regulated agent can submit the registration application with the verification statement, or if the overseas company is making the application itself, the agent can provide the verification separately to Companies House by email within 14 days of the application being made.

    Verification will also be required when the overseas company complies with its duty to update its entry on the register each year.

    Fee

    There is a registration fee of £100 payable to Companies House.

    Practical Steps

    • Overseas entities which: (a) currently hold UK property; (b) disposed of UK property since 28 February 2022; or (c) intend to acquire UK property, should be collating the information required to register and submitting their registration applications to Companies House as soon as possible
    • Acquisitions of a freehold interest or of a lease for a term exceeding seven years from the date of grant or the grant of a legal charge which are completed and registered at the Land Registry between 1 January 1999 and 4 September 2022 will not immediately be affected by the Register, but the purchaser should register as soon as possible (and must register by 31 January 2023)
    • Acquisitions of a freehold interest or of a lease for a term exceeding seven years from the date of grant cannot be registered at the Land Registry after 5 September 2022 unless the overseas entity is on the Register
    • Overseas entities must provide details of any disposal of a freehold interest or of a lease for a term exceeding seven years from the date of grant or the grant of a legal charge since 28 February 2022 to Companies House by 31 January 2023 whether or not the overseas entity in question needs to be on the Register
    • The disposal of a freehold interest or of a lease for a term exceeding seven years from the date of grant or the grant of a legal charge by an overseas entity which acquired the property on or after 1 August 2022 will not be permitted unless the overseas entity is on the Register
    • An overseas entity which acquired the property and applied to be registered at the Land Registry prior to 1 August 2022 can dispose of a freehold interest or of a lease for a term exceeding seven years from the date of grant or grant a legal charge in respect of the property before 31 January 2023 without first being on the Register, although it will still need to apply to the Register and provide details of the disposition by 31 January 2023.

    Disclaimer

    This note reflects the law as at 1 September 2022. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

    You might also be interested in:

    Lianne Baker
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    Developments in Fiduciaries Powers in Relation to Ethical Investments – Ashleigh Carr and Maryam Oghanna write for ThoughtLeaders4 Private Client Magazine

    Senior Associates, Ashleigh Carr and Maryam Oghanna, have authored an article for Thought Leaders 4 on the topic of developments in fiduciaries powers in relation to ethical investments.

    The article was first published in Thought Leaders 4 Private Client Magazine ‘Next Gen Wealth’ in August 2022 and can be read in full below.

    To what extent can fiduciaries take non-financial considerations into account when exercising their investment powers?

    It seems like everyone is talking about ‘ethical investing’. In this article, ethical investing can be read to mean “an investment made not, or not entirely, for commercial reasons but in the belief that social, environmental, political or moral considerations make it, or also make it, appropriate”, (per Lord Wilson in R (Palestine Solidarity Campaign Ltd & Anor) v Secretary of State for Communities and Local Government [2020] UKSC 16).

    This may inhabit different forms, including ‘ESG’ (measuring the ethical impact of an investment using Environmental, Social and Governance indicators), Socially Responsible Investing or ‘SRI’ (which goes one
    step further, by screening and avoiding investments based solely on ethical considerations) and Impact Investing (investments which aim to create financial returns and measurable social or environmental impact).

    Whilst the concept of ethical investing dates back many hundreds of years, it is increasingly becoming a hot topic for private wealth advisors, many of whom are reporting a growing demand, particularly amongst ‘next gens’.

    This influence affects trustees and other fiduciaries who must consider whether and what weight to give non-financial factors when performing their fiduciary duties. Whilst the law regarding trustee duties in relation to investments is well established, the bedrock cases significantly predate the growing trend in ethical investing. New law is arguably required to reflect social, economic and environmental developments as the climate crisis and sustainability continue to climb the global agenda.

    In this article we look briefly at case law which touches on the tension between ethical investing and prioritising financial reward, and the legal guidance and commentary which is emerging on the topic.

    Case law

    The starting point when considering the case law on non-financial considerations is Cowan v Scargill [1985] Ch 270. In that case, Sir Robert Megarry V-C held that the board of trustees of a mineworkers’ pension scheme were in breach of their fiduciary duties by blocking overseas investments and investments which were in competition with coal.

    He reasoned that, where the purpose of the trust is to provide financial benefits for the beneficiaries, the trustees should exercise their power of investment to yield the best return (judged in relation to the risks of the investments in question). Trustees must exercise their powers in the best interests of the beneficiaries and put aside their own personal interests and views.

    However, it was noted that financial benefit would not always be the trustees’ sole concern: “benefit” has a very wide meaning and it may be reasonable to prioritise benefits other than financial ones, where all the beneficiaries are adults and support an alternative policy. However, “such cases are likely to be very rare”, and where the trusts are for the provision of financial benefit, there would be a heavy burden on anyone who asserted that it was for the benefit of the beneficiaries to receive less.

    Whilst the impact of Cowan has been debated, it is unlikely to offer much comfort to trustees and beneficiaries who wish to prioritise benefits other than financial ones. This is demonstrated by the recent case McGaughey v Universities Superannuation Scheme Ltd [2022] EWHC 1233 (Ch) which concerned two members of a pension scheme who were unhappy with the trustees’ continued investment in fossil fuels. Instead of alleging that the trustees had a duty to sell its fossil fuel investments for ethical reasons, the claimants pursued a claim on the basis that the pension scheme’s continued investment in fossil fuels represented a breach of their directors’ duties pursuant to sections 171 and 172 of the Companies Act 2006. Their claim ultimately failed.

    The Court noted that the claimants had not run the ethical argument “no doubt because the Court rejected such an argument in Cowan v Scargill [1985]” and suggested that the more appropriate claim would have been a breach of trust claim against the company, despite the practical difficulties that would have arisen with that claim.

    The position is slightly different for charitable trusts. Cowan was distinguished in Harries v The Church Commissioners for England [1992] 1 WLR 1241 (“the Bishop of Oxford case”) which was, until recently, the only reported case dealing with ethical investments by charities. Here, the Bishop of Oxford was concerned that, by permitting investments in South Africa, the Church Commissioners of England failed to sufficiently take into account the underlying purpose for which the assets were held.

    Sir Donald Nicholls V-C held that where the trustees held investments, the starting point (similarly to Cowan) is that the trust will be best served by the trustees seeking to obtain the maximum financial return. However, the decision goes further than Cowan in that he recognised that there were certain exceptions to the general rule: (i) where the nature of the investments would directly conflict with the charity’s purposes; (ii) where the investment may indirectly conflict with the charity’s purposes (such as through alienating certain donors or beneficiaries); and (iii) where there is little or no risk of significant financial detriment to the charity.

    It was unclear whether the Bishop of Oxford case created an “absolute prohibition” on making investments that directly conflicted with the charity’s purposes or objects. The High Court recently considered that question in Butler-Sloss v The Charity Commission for England and Wales [2022] EWHC 974 (Ch), in which the trustees of two charities sought the court’s blessing of the adoption of new investment policies which would align the charities’ investments with the Paris Agreement (which aims to limit global warming). The judge concluded that there was no absolute prohibition on directly conflicting investments (a view which seems to have been shared by Charity Commission, as expressed in its current guidance on charity’s investments, CC14, and all of the parties in the case). Instead, the trustees have to perform a discretionary exercise, balancing the potentially conflicting investments against the risk of financial detriment from implementation of that policy. He further held that the trustees were permitted to adopt the proposed
    investment policy and that in doing so would discharge their duties in respect of the proper exercise of their powers of investment.

    Commentary

    There are differing views on the impact of Cowan and the scope of trustees’ duties to consider ethical investing. Some of the legal commentary suggests that Cowan is misunderstood and that the nature of trustees’ fiduciary investment duty has always been sufficiently flexible to allow pension schemes to consider ethical investing. Furthermore, guidance in the charity sector provides greater scope for fiduciaries to take a balanced approach to considering investments and what is in the interests of the charity.

    Trust law already acknowledges that ‘benefit’ is not limited to financial returns, yet it remains unclear where to draw the line. Cowan still appears to represent a barrier to ethical investing, at least where the only demonstratable benefit is ethical and not financial. The thrust of much of the emerging legal commentary is that this is an unnecessarily restrictive approach, and there is increasing feeling that financial institutions and other organisations should take non-financial risks into account when exercising fiduciary duties.

    This may partly be due to the dichotomy between ethical investing and financial reward becoming outdated, as acknowledged by Lord Sales in a recent lecture paper entitled ‘Directors’ duties and climate change: Keeping pace with environmental Challenges’:

    “there is much force in the view that directors may and, increasingly, must take into account and accord significant weight to climate change in their decision-making. This is not least because a failure to act sustainably is more and more likely to have adverse financial impacts on companies who are, or are perceived to be, behind the curve on environmental issues”.

    As Lord Sales concluded in the context of company law, there appears to be justification for trust law to be modified to enable trustees to accord greater weight to ethical issues than has previously been possible.

    Ethical investing is only set to grow in popularity and can be a significant force for change. Market pressures such as changing societal attitudes and reputational risk are bringing ethical investing to the fore at pace. In this brave new world, trustees and beneficiaries alike would benefit from further direction elaborating on, and arguably supporting, a fiduciary’s ability to prioritise ethical investing.

    There is an emerging view that judicial re-examination may prove useful, but that the real solution will be legislation. We are already seeing new legislation, policy and guidance being introduced in other areas (for example, by the Companies Act 2006 and Occupational Pension Schemes (Investment) Regulations 2005, the Charities (Projection and Social Investment) Act 2016 and guidance by both the Law Commission and Charity Commission). However, the Trustee Act 2000 fails to deal with non-financial considerations. A statutory update may provide greater clarity and certainty.

    In practice, and at least whilst Cowan remains good law, it seems that the identity of the trustees and, possibly more importantly, beneficiaries will have the biggest impact on the uptake of ethical investing in the context of individual trusts. As next gens increasingly populate the beneficial classes of these structures, we could reasonably expect to see an increasing positive trend towards ethical investing. Whilst legal developments are awaited to support ethical investing, there are practical steps which might usefully be taken to support the consideration of non-financial benefit when exercising fiduciary powers, and for mitigating risk.

    If settlors want to provide trustees with the freedom or even an incentive to invest ethically, they should adopt a similar stance as the regulatory and legislative approach in England and Wales in the context of company law, namely, to seek to inject ethical considerations into their decision making processes. When settling new structures, settlors should think carefully about the purpose and aims of the fund, and consider utilising charitable trusts, purpose trusts and/or foundations. Where there is a discretionary trust, careful thought should be given to the terms of the trust, which can record the settlor’s expectations as to the extent to which trustees can, or should, take non-financial benefits into consideration.

    By taking this approach, settlors can incorporate sustainability and ethical investing into a trustee’s duty, instead of leaving it as an obstacle, whilst we wait for the law to catch up with the shift in approach to investing that many next gens are already demanding.

    NFTs explained: Rory Carter speaks to The Times

    Contentious Trusts and Estates Associate, Rory Carter, has been quoted in The Times by its Chief Art Critic, Laura Freeman, in an article entitled ‘NFTs explained – and why people really buy them’.

    An NFT is a non-fungible token that can be used to represent ownership of unique items. In the article, in the context of Art, Rory describes it as “a line of code pointing towards an image. It’s a bit like the title deeds to a house. If you’re going to court to prove ownership of a house, you don’t show the judge round your home, you show them the deeds.”

    The piece goes on to investigate the attraction of NFTs and their innovative nature, in which Rory explains that “People are now starting to apply the technology to more artistic endeavours.”

    You can read the full article here, behind the paywall.

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    Fiona Smith quoted in the FT on the rise in attempts to block probate

    Abstract Real Estate 2

    Private Client Partner, Fiona Smith, has been quoted in the FT article entitled ‘Attempts to block probate rise 37 percent in two years’.

    Attempts to block probate rose to a record level in England and Wales last year. Challenges to the distribution of inherited estates jumped to 9,926 in England and Wales’s courts and tribunals service centres in 2021, up 37 per cent compared with 2019.

    On the rise, Fiona commented: “People are becoming more litigious when it comes to wills. Those who might have accepted being left out of a will 10 years ago may now be more likely to challenge it”.

    The full article can be read here, behind the paywall.

    With a rise in attempts to block probate, it is imperative to seek robust legal advice to avoid disputes. For more information, please contact Private Client Partner, Fiona Smith, or Head of Contentious Trusts and Estates, Roberta Harvey.

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    After The Drop: How To Manage NFTs

    Forsters was delighted to host Artistate’s panel discussion on managing NFTs (Non-fungible tokens) on 30th June. Chaired by Pierre Valentin, head of art and cultural property at Constantine Cannon (and co-founder of Artistate), speakers included James Brockhurst, Forsters; NFT artists Ed Fornieles and Misha Milovanovich; Nicola Goldsmith, a tax accountant at Haines Watts; Nick Dunmur, Associate of Photography Business and legal adviser; and Camille Beckmann of Artistate.

    The discussion centred on the practical, legal and tax issues that are caused by the creation and collection of NFTs.

    NFTs vs Traditional Art Market

    Pierre’s first question was directed at the NFT artists and addressed the gulf between NFTs and traditional art market practices. Ed saw NFTs as a novel way for artists to raise funds, as well as outmanoeuvre the art market’s traditional gatekeepers. Misha made it clear that the medium was a natural next step for digital artists to explore with the added benefit that it could monetise an otherwise difficult creative pipeline.

    One of Ed’s series of NFTs, Finiliar, was displayed on the screen throughout. These works are ‘live’ in the sense that their moods are tied to the current value of a particular cryptocurrency and aim to reflect the emotional bonds that traders form with commodities.

    The Blockchain revolution

    James offered the room some wider context, noting that blockchains and decentralised ledger technologies were nothing short of a revolution, akin to the adoption of joint stock companies 400 years previously. Existing legal principles had been adapted to accommodate crypto assets, especially with regards to expanding the definition of “property”. The significant early decision in the Singaporean case of B2C2 Ltd v Quoine Pte Ltd, as well as the recent case of Osbourne v Ozone Networks Inc. trading as Opensea and Persons Unknown confirmed that NFTs could be treated as property under English law.

    Tax, Copyright and Intellectual Property Implications

    Nicola tackled some of the tax issues arising as a result of creating or owning NFTs, which are both volatile in value and created and sold across jurisdictions.

    Camille touched on the intellectual property and copyright concerns that naturally arise in the space due to the fact that the recycling of familiar imagery is a central tenet of NFTs. She noted the controversial incident involving artist-designed Stormtrooper helmets, which were subsequently minted as NFTs by Artwars and listed for a total of £5m, likely without the permission of the artists.

    Learn more about our Art and Heritage Property services here.

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    The Great Freeze: the effect of EU sanctions on EU trusts – Maryam Oghanna writes for Private Client Business

    Contentious Trusts and Estates Senior Associate, Maryam Oghanna, together with Richard Dew of Ten Old Square, have authored an article for Private Client Business on the effect of EU sanctions on trusts with a connection to Russian nationals.

    In their article, Maryam and Richard consider the fifth and sixth package of sanctions adopted by the Council of the EU, which prohibited the provision of trust services to any trust with a “Russian connection”, and the impact that they have had on affected trust and service providers.

    The full article can be read here, behind the paywall.

    Richard Dew and Maryam Oghanna, ‘The great freeze: the effect of EU sanctions on EU trusts’, Private Client Business 2022, 4, 117-123

    Maryam Oghanna
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    Leading family lawyers on the future of divorce: Jo Edwards talks to Spear’s

    Head of Family, Jo Edwards, among leading divorce and family lawyers sharing their thoughts with Spear’s Magazine on the evolution and future of the family law profession.

    The Q&A, entitled ‘Leading family lawyers on the future of divorce’, brought together top family lawyers to share their thoughts on how the profession has changed and where it is headed next.

    Jo spoke about her experience as a mediator working with high net worth clients, the shift away from clients thinking that litigation is the only way to resolve disagreements on divorce or separation, and the growing prevalence of nuptial agreements.

    The full article can be read here.

    Jo was listed as a Top Recommended lawyer in the latest Spear’s Family Law Index.

    Details of family mediation at Forsters may be found here and of our extensive expertise in nuptial agreements here.

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    Joanne Edwards

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    The Ties that Bind: Roberta Harvey and Rory Carter write for STEP on privity of interest and its implications for enforcement of judgments in foreign jurisdictions.

    Head of Contentious Trusts and Estates, Roberta Harvey, and Contentious Trusts and Estates Associate, Rory Carter, have authored an article for the STEP Trust Quarterly Review magazine entitled ‘The Ties that Bind’.

    In their article, Roberta and Rory review the Mezhprom v Lenux judgment on privity of interest binding trustees in foreign jurisdictions. The article includes:

    • Background of the Mezhprom v Lenux ruling and application of Rules 43 and 48 of Dicey, Morris & Collins.
    • Consideration of the estoppel of privity of interest where a judgment against a defendant in one capacity binds him in another capacity, contrasted with where a non-party is bound by a judgment.
    • Examination of the further complication caused by firewall provisions, the risks to trustees not protected by firewall legislation, and some of the practical issues that arise.

    The full article can be read here.

    Roberta Harvey and Rory Carter, ‘The Ties that Bind’, STEP Trust Quarterly Review magazine, June 2022.

    Chambers HNW Guide 2022: New rankings and continued recognition for our Private Wealth practice

    The Chambers HNW Guide 2022 continues to recognise Forsters as a leading and top ranked Private Wealth law firm. The Guide is seen as the definitive authority for best-in-class law firms, ranking the leading professional advisors to the Private Wealth market.

    Forsters is delighted to report that as well as maintaining our Top Band status in Private Wealth Law, the firm’s high net worth Residential Property team has been elevated to Band 1, our Art and Cultural Property team has been elevated to Band 2 and the Family team has been recognised in the inaugural Family/Matrimonial: Ultra High Net Worth table.

    This year the HNW Guide ranks 22 lawyers. Our ‘foreign experts’ in Singapore and United Arab Emirates continue to be acknowledged, alongside our Family team’s mediation practice with Joanne Edwards’ inclusion in the Spotlight Table for Family/Matrimonial: Mediators.

    Private Wealth Law – Band 1

    Ranked Lawyers: Nick Jacob, Anthony Thompson, Daniel Ugur, Xavier Nicholas (newly ranked), Carole Cook, Catherine Hill, Kelly Noel-Smith, Emma Gillies and Charlotte Evans-Tipping

    Chambers notes: Forsters are “a leading private wealth law firm,” states a source. A commentator adds: “They’re a wonderful firm. They are very strong on landed estates and UK property.”

    The firm has wide-ranging expertise in matters such as tax, succession and business planning as well as cross-border and international issues. “The quality and timeliness of their advice is first class,” says an observer.

    Real Estate: High Value Residential – Band 1

    Ranked Lawyers: Lucy Barber (elevated to Band 2), Helen Marsh, Robert Barham and Charles Mieville

    Chambers notes: Forsters’ Residential Property team is well regarded and recognised by market commentators for its work on prime property transactions.

    “Forsters have an excellent variety of skilled team members,” a source remarks.

    An interviewee enthuses: “The team is always exceptionally responsive no matter the day or time. I have had calls on the weekends and late evenings answered,” adding that: “Excellent communication is the hallmark of handling complex and sophisticated matters – the team at Forsters have been exceptional for me in this.”

    Private Wealth Disputes – Band 2

    Ranked Lawyers: Roberta Harvey (elevated to Band 1), Emily Exton, Alison Meek and Ashleigh Carr (newly ranked in the Associates to Watch category)

    Chambers notes: Forsters’ specialist contentious trusts and estates lawyers represent various clients globally in private wealth disputes. Mandates often relate to administration issues, will challenges and breach of trust claims. A peer recognises the firm’s consistent progress as “a coming force” in the market.

    Sources appreciate the combination of bench strength and client care at the firm. “They have the depth and numbers to deal with exhausting and hard-fought litigation matters over a long period,” says an interviewee. Another source hails the firm’s “wide range of supporting staff, all of whom have the same caring and intelligent approach to clients.”

    Art and Cultural Property Law – Band 2

    Ranked Lawyers: Catherine Hill (newly ranked) and Laura Neal (newly ranked in the Associates to Watch category)

    Chambers notes: The Art and Cultural Property practice at Forsters brings together lawyers from across the firm. It regularly advises collectors, galleries and auction houses, and is particularly notable for handling estate planning and commercial matters for living artists.

    Sources highlight in particular their positive experiences working with the firm’s lawyers. “They are efficient, quick and very good for their clients. They are very approachable and personable. I like them. Not only are they a good firm but their people are very likeable,” says a interviewee.

    Another commentator says: “I can’t fault them. They are extremely thorough and approachable, detail-focused and supportive. We enjoy working with them and wouldn’t hesitate to recommend them to anyone.”

    Family/Matrimonial: Ultra High Net Worth – Band 3

    Ranked Lawyers: Joanne Edwards, Rosie Schumm, Simon Blain and Dickon Ceadel

    Chambers notes: Forsters advises wealthy clients on a wide array of matters in family law such as divorce, financial remedy proceedings and Children Act cases. An interviewee says: “They are one of the best family law teams in the country.”

    “They take a very pragmatic and collaborative approach to matters,” states a source.

    A commentator adds: “They are a real comforting presence to have on a case; they have an air of confidence and calm.”

    Rosie Schumm to speak at the Private Client Forum Americas 2022

    Family partner, Rosie Schumm, will be speaking at the Private Client Forum Americas 2022.

    The three day event, taking place in Mexico on 13 – 15 July, will bring together the most senior and elite advisors to high and ultra high net worth individuals to discuss the most timely and concerning issues across the Americas, with an outlook on the rest of the world.

    Rosie will be co-presenting the session ‘Alternative Families, Where Are They Now?’ alongside Gretchen Schumann of Schumann and Partners, Gretel Ciniglio de Pérez of Fabrega Molino and Sergio Michelson of Brigard & Urrutia.

    Further details about the conference can be found here.

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    Keeping up with the modern family: Hannah Mantle to speak at TL4 & ConTrA Contentious Trusts conference

    Dispute Resolution Senior Associate, Hannah Mantle, is speaking at the Thought Leaders 4 & ConTrA conference ‘The Modern Trust – Contentious Trusts in a Changed Social Media Landscape’.

    The conference, taking place on 5 July 2022, will see experts join together to discuss the hot topics and issues facing trusts in today’s world.

    Hannah will join Simon Goldring of Maurice Turnor Gardner and Emilia Piskorz of Mishcon de Reya to provide a session at 16:30 entitled ‘Keeping up with the modern family: looking through the crystal ball to ask what families will look like in the next decade’.

    You can find out more about the event here.

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    Nick Jacob and Ashleigh Carr to speak at Transcontinental Trusts: Bermuda Conference 2022

    Private Client Partner, Nick Jacob, and Contentious Trusts and Estates Senior Associate, Ashleigh Carr, have been invited to deliver presentations at the Transcontinental Trusts: Bermuda Conference 2022.

    Ashleigh will be hosting the session entitled ‘Examination of offshore trust judgments’ alongside Hannah Tildesley of Appleby Global.

    Nick will be presenting a case study on Tax Planning with Patrick Harney of Mishcon de Reya, Alessandro Bavila of Maisto E Associati and Laura Zwicker of Greenberg Glusker.

    With 150+ delegates from around the globe, this conference has a cross-border approach to providing solutions to the most complex of private client issues.

    The conference will take place from 29 June to 1 July. You can view the full agenda, and register to attend, here.

    STEP Private Client Awards 2022/23: Forsters’ Private Wealth team shortlisted in five categories

    Forsters’ Private Wealth team has been shortlisted in the most number of categories of any firm, with five nominations in the STEP Private Client Awards 2022/23:

    • Private Client Legal Team of the Year (large firm)
    • International Legal Team of the Year (large firm)
    • Family Business Advisory Practice of the Year
    • Employer of the Year
    • Digital Assets Practice of the Year

    The STEP Private Client Awards are seen as the hallmark of quality within the private client sector, recognising and celebrating excellence among private client professionals. In its 17th year, the awards have seen a record number of nominations, with 337 submissions across 27 countries.

    The nominations showcase the breadth of specialisms within our Private Wealth practice and most notably its experience in advising on digital assets, being one of the first firms to develop expertise in this area.

    In addition, this year Forsters has been elevated to large firm status. To be recognised as a large firm and shortlisted for the Employer of the Year award, is a testament to Forsters’ investment in the recruitment, training and wellbeing of first-class lawyers. This is demonstrated by our 2023 premises move, which has been driven by our desire to create an inclusive work culture and promote effective collaboration between partners and staff, as well as provide a superior service to our clients and enhance our sustainable business practices.

    The news follows our success at the 2021/22 Awards Ceremony, where Forsters was named International Legal Team of the Year (midsize firm) and Contentious Trusts and Estates Team of the Year (midsize firm).

    The winners will be announced at the Awards Ceremony on 14 September 2022. The full shortlist can be found here.

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    Guy Mawson writes for IFA Magazine on no fault divorce

    Family Senior Associate, Guy Mawson, has authored an article for IFA magazine entitled ‘No-fault divorce – the end of conflict?’.

    On 6 April 2022, the most significant change to divorce laws in a generation came into force. Widely reported as signalling the “end of the blame game”, the importance of no-fault divorce should not be underestimated.

    However, Guy highlights that while the change to the law is welcome, spousal conflict will not simply disappear. He explains “the often far more thorny questions of agreeing childcare arrangements and a financial separation still remain as does grappling with the potential damaging impact of conflict, both emotionally and financially”.

    In his article, Guy covers the following factors:

    • The change to the law
    • The impact of the change to the law
    • Reducing conflict

    The full article can be read here.

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    An undisputed legacy – Ensuring your wealth is passed on unhindered

    Any individual fortunate enough to have generated wealth, or to have been a custodian of family wealth, during their lifetime should plan for how it will be dealt with after their death.

    In this paper, we consider nine key steps individuals can take to help ensure that their estates pass to the next generation without disputes or litigation.


    An undisputed legacy - click here to download the whitepaper in PDF format


    A smooth generational transfer of wealth is taken for granted by most, but statistics from the Ministry of Justice show that this might not be the case. Over the past ten years, more than 2,300 will disputes have been heard by the High Court. Many thousands more didn’t end up in court but did destroy numerous family relationships and incur a great deal of costs before being settled.

    The number of 'high value' estates - those worth £1 million or more - have risen from 8,338 in 2013/14 to 11,210 in 2020, there is clearly more wealth than ever to be disputed.

    Before you make your will

    Undertake a capacity assessment to avoid disputes

    A capacity assessment is undertaken and a report prepared by a medical practitioner, either a GP or a psychiatrist. The report can be used to show that the testator had mental capacity when instructions were given for the will to be prepared/the will was executed.

    If the testator is particularly elderly, vulnerable, unwell, or is making significant changes to their will it is possible that the will could be challenged post death on the grounds of lack of capacity. A capacity assessment and report should make it more difficult for the will to be challenged on these grounds.

    It is important to note that the instructions to the GP/psychiatrist must explain why the assessment/report is required and set out the rule in the case of Banks v Goodfellow.

    Prepare your family members in advance if you have unusual plans for your wealth

    Most family members expect wealth to be primarily kept within the family. If this is not how you intend to structure your estate, it is advisable to inform your family of your intentions, however difficult this might seem.

    Avoid accidentally ‘creating’ dependants – this can lead to litigation

    Another key argument individuals may use to challenge a will is that they were financially dependent on the deceased, and that they have not been properly provided for by your will/under the intestacy rules. It may be surprising to learn that you can ‘create’ a relationship of dependency accidentally, by establishing a regular and long-term pattern of making gifts. If you wish to give money to someone – a child or a grandchild perhaps – it is better to do so in a single lump sum, as this cannot create a relationship of dependency, making it far more difficult for them to challenge your will.

    If your family is international, plan for this aspect in detail

    It is critical for specialist advice to be taken on the international aspects of a will if the testator and their heirs are living in multiple jurisdictions. Different countries handle inheritance differently, and that can easily end up with your wishes not being followed. For example, some countries do not view a child as a legitimate heir to an estate if their parents were not married when they were born. It is very important for the solicitor preparing the will to have a complete understanding of the family circumstances, this should ensure that the testators wishes can be adhered to irrespective of where the testator or heirs live.

    When you make your will

    Record all wishes in your will or leave a very detailed letter of wishes if the will creates a discretionary trust

    Recording everything appropriately and/or preparing a letter of wishes if a discretionary trust is created will go some way to preventing challenges to a will. However, it might not prevent a claim being brought under the Inheritance (Provision for Family and Dependant’s) Act 1975 or a claim for undue influence or promissory estoppel.

    Choose your executors carefully to avoid disputes

    If you are leaving real estate as part of your will, it is advisable to name at least two executors. Choose these two individuals carefully, as executors with a poor relationship can easily lead to disputes, as happened in the estate of the renowned architect Zaha Hadid . A dispute between the executors of her estate led to more than four years of litigation following her death, depleting the value of the estate significantly.

    Make sure you execute your will properly with witnesses in person

    The Covid-19 pandemic led to difficulties for some families in executing a will correctly. Social distancing and lockdown restrictions during 2020 and 2021 meant that some found it challenging to get two witnesses to sign the will in person at the same time. Failure to follow this requirement, set out in section 9 of the Wills Act 1837 can render the will invalid. If you are concerned that your will was not executed properly during lockdown, we recommend you seek legal advice on whether it should be corrected.

    ‘Competing’ wills in different jurisdictions can lead to litigation

    There have been cases where an individual has significant assets in two different countries, and a different will in each jurisdiction that covers all assets globally. This kind of ‘competing will’ situation can end in costly cross-border litigation. If it is necessary to have different wills in different jurisdictions, it’s important to make sure that they complement each other.

    After you make your will

    Consider a postnuptial agreement for further protection

    Some individuals may feel it suitable for their wishes to have even more protection from future disputes. This may be achieved by having their spouse’s acceptance of their will confirmed by a postnuptial agreement. If your spouse has read your will, accepted it in full and contracted separately to respect it following your passing, it is much more difficult for them to challenge it.

    Conclusion

    An estate dispute between loved ones is difficult for many to contemplate. But, as disputes like these become more common, and the stakes involved in them continue to rise, anyone with significant assets to pass on must consider the steps they should take to minimise the risk of it happening in their own family.

    The Forsters team is very well-placed to guide high net worth individuals through the process of estate planning to try to ensure the risk of disputes is minimised when their estates are administered. Their expertise includes some of the highest-value and most complex cross-border estates.

    To talk to the team about your estate planning needs, contact Fiona Smith, Partner, Private Client or Roberta Harvey, Partner, Head of Contentious Trusts & Estates.


    The Life Cycle of Family Wealth

    From growing a business to starting a family or handing over control of that business to the next generation, every individual has their own goals to aspire to. Our Private Wealth lawyers advise our clients throughout this family life cycle, providing the legal advice required for specific transactions such as purchasing a home or selling a business, whilst also advising on the long-term opportunities for succession and estate planning.

    Forsters' Private Wealth - The Life Cycle of Family Wealth logo

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    What a corker! We take a look at Sussex wine’s PDO status

    White grapes in a vineyard

    Still and sparkling wines produced in East and West Sussex are the latest UK product to win Protected Designation of Origin (PDO) status.

    The announcement, made on Wednesday 15 June 2022 by the Department for Environment, Food and Rural Affairs (DEFRA), affects some of the most prominent labels in the English wine market. Though not without its critics, the move has been heralded by many as a boost for the industry. But what does it actually mean?

    What is a PDO?

    PDO stands for ‘Protected Designation of Origin’, and is essentially the post-Brexit equivalent of the EU DOC. Products with PDO status have been produced, processed and prepared within a specified region. They must meet quality standards set by DEFRA, and have characteristics specific to their area of origin.

    Products that meet these characteristics are free to display the PDO symbol on their packaging, and other producers of the same product will not be able to use the region’s name to describe the product. For example, the Sussex wine PDO prevents wine produced in other areas from calling themselves “Sussex” wines. The PDO distinguishes Sussex wines from wine produced elsewhere due to more than just their area of origin: it also recognises the area’s soil, climate and local winemaking expertise.

    There are 32 registered food and drink names with PDO status in the UK, four of them being for wine: England, Wales, Darnibole and now Sussex. Though no other wine areas in the UK currently have an active PDO application, Sussex’s new status might encourage winemakers in other regions to apply.

    I own a Sussex vineyard – what does this mean for my business?

    Owning a vineyard in Sussex does not automatically grant you the right to use the PDO symbol on the wine you produce. In addition to the grapes being grown in Sussex, the wine must also be processed and produced in the region. The PDO also has further requirements that limit grape variety and place maximum harvest yields on vineyards. There are also restrictions on methods and the ABV of the wine. Further regulations are yet to be confirmed, and a consultation document will also be circulated throughout the Sussex wine industry, which will allow producers to comment before the requirements are confirmed by DEFRA.

    So far, the PDO sets the following requirements, among others:

    • It limits the grape varieties that can be used to make either still or sparkling Sussex wines to predominantly Chardonnay, Pinot Noir and Pinot Meunier (though Arbanne, Pinot Gris, Pinot Blanc, Petit Meslier and Pinot Noir Précoce may be used).
    • The grapes must be hand-harvested, with a maximum harvest yield of 12 tonnes per hectare (14 in exceptional circumstances). Detailed records must be kept and made available for inspection.
    • Sussex sparkling wine must be made in the traditional method and from classic sparkling wine grape varieties such as Chardonnay.
    • The ABV and chemical makeup of each wine will be subject to an organoleptic test and approved by Wine Standards.
    • At least 85% of the grapes used to make Sussex sparkling wine must be of the vintage year.
    • Single variety wines must contain a minimum of 90% of the named grape.

    If the wine your vineyard produces does not meet the PDO’s requirements – if it is non-alcoholic, for example – you will be unable to call your product “Sussex” wine, even if the product is produced, processed and prepared in the region. If you wish to use the PDO status, you may need to consider the cost implications: changes to your grape supply or processing facilities could be required.

    Land in Sussex is already attractive due to the reputation and proven track record of the area’s wine production; many vineyards and farms change hands off market for significant premiums. It will be interesting to see whether PDO will impact land values further.

    I’m looking to buy a Sussex vineyard – what does this mean?

    Assuming you are buying a vineyard or winery (or both) that is claiming PDO status and you want to continue to do so:

    • Checking that the PDO requirements are being met will be important. Having a good consultant or land agent on side early in the process will be helpful, as they can review records and compliance on the ground, in much the same way as a good land agent can assist with BPS payments on a purchase. Management information will be vital, and the contract should provide for reasonable access between exchange and completion and a handover on completion. Depending on the importance for the brand and the seller’s involvement, it might also be prudent to consider asking the seller to assist with enquiries or inspections that arise after completion – though this may be difficult to enforce in practice. Having an experienced agent on side to maintain good relations between buyer and seller can be just as important as a well-drafted contract.
    • Where there is a meaningful period between exchange and completion, the contract ought to address compliance in the interim. It would be sensible to seek a warranty that the seller has complied with the PDO requirements and will continue to comply until completion.
    • Employees or consultants will become even more important: retaining key personnel responsible for compliance will be critical where the buyer is not already an experienced vintner or bringing in their own team. If TUPE applies, as it will for the purchase of most commercial vineyards and wineries, employees will transfer automatically to the buyer; consultants will not. A sensible buyer would ask for contractual provisions designed to ensure the smooth handover of the personnel, business and knowhow.
    • The business element may be a larger part of the transaction than you think. While it remains to be seen whether PDO status will guide consumer choice and impact values, acquiring a label with PDO status could entail purchasing goodwill, IP, stock and other assets more commonly seen in corporate M&A than in farm purchases. It is vital that the professional team has specialist corporate support to cover the purchase of the business as well as the land and buildings.

    If you are interested in purchasing a Sussex vineyard, or if you have any other questions for the Forsters Vineyards & Wineries team, please get in touch with Henry Cecil.


    Vineyards and wineries

    A great bottle of wine is a wonderfully elegant, simple thing. But the process of making it is complicated. Small variables in soil, climate, management and markets can make the difference between a great year and an average one.

    An image of grapes growing in a vineyard.

    Stepping Stones: Hannah Mantle and Charles Hancock write for the STEP Journal on modern families

    Contentious Trusts and Estates Senior Associate, Hannah Mantle, and Private Client Associate, Charles Hancock, have authored an article for the STEP Journal entitled ‘Stepping Stones’.

    In their article, Hannah and Charles review recent case law in England and Wales that illustrates how the courts are adapting to the modern definition of ‘Family’.

    The article was first published in the STEP Journal, Issue 3, 2022, page 70 on 6 June 2022.


    It is widely reported that in recent years the number of people contesting wills has increased dramatically. One reason for this is the complicating factors associated with changes to the traditional family structure. The STEP Report Meeting the Needs of Modern Families (the Report), sponsored by TMF Group and released in November 2021, challenges legislators to adapt and modernise in order to support the needs of modern family structures.

    This article focuses on some of the key legal principles surrounding trust, inheritance and succession disputes in England and Wales and considers how current case law is adapting to the changing definition of the ‘family’.

    How estates can be challenged

    Notwithstanding the long-standing principle of testamentary freedom in England and Wales, there are numerous ways for an aggrieved party to challenge a will, for example:

    • lack of proper formalities;
    • lack of capacity or lack of knowledge of approval;
    • fraud or undue influence; and/or
    • subsequent revocation.

    Of course, different conditions must be satisfied in order to bring a successful claim in the various categories. Although this article cannot examine the types of challenge in detail, it touches on some recent examples that demonstrate that some older wills or deeds containing prescriptive definitions about family members, or the intestacy rules, are not always beneficial for modern family structures.

    Additionally, where a person dies domiciled in England and Wales, a claim may be brought under the Inheritance (Provision for Family and Dependants) Act 1975 (the 1975 Act). The 1975 Act provides a mechanism for various categories of person to bring a claim against the deceased’s estate where they are left without ‘reasonable’ financial provision. This could be a spouse or civil partner, ex-spouse or ex-civil partner, child, ‘child of the family’ or someone maintained by the deceased. The claimant must show that the provision made for them was not sufficient to be reasonable, and for everyone other than spouses or civil partners, the provision made under the 1975 Act will be restricted to maintenance (and balanced against the needs of other beneficiaries or claimants).

    How the law is adapting to the definition of ‘Family’ in the modern era

    For a long time, the law in England and Wales has tried to evolve with changing norms. An example of this is the introduction of the Legitimacy Act 1976, which broadened the default definition of children to include legitimate, illegitimate, legitimated and adopted children (together ‘child’ or ‘children’). Another example is the 1975 Act, which was amended as recently as 2014, and was preceded by legislation that only allowed spouses and certain children to benefit. As the Report shows, there has been a shift away from the traditional family structure of a heterosexual couple and their biological children, and a rise of blended families (i.e., those brought together over time by new relationships).

    To some extent, these changes have been recognised in the UK Human Rights Act 1998 (the 1998 Act) the UK Civil Partnerships Act 2004 and the UK Marriage (Same Sex Couples) Act 2013 (the 2013 Act). However, one of the challenges faced by courts is how to interpret trust deeds created prior to such legislation: trust deeds that may contain restrictive definitions written in the context of a specific culture.

    The case law

    The recent case of Goodrich v AB is an example of a modern approach to trust interpretation. The trustees of two employee benefit trusts sought direction from the England and Wales High Court (the Court) concerning the construction of the terms ‘spouses’ and ‘children’ contained in a settlement deed dated
    April 1990. The Court determined that civil partners and same-sex spouses were included within the definition of ‘spouses’, but stepchildren were excluded from the definition of ‘children’.

    The judge held that s.3(1) of the 1998 Act required the Court to interpret the definition of spouse in the 1990 trust deed in accordance with the rights guaranteed under the Convention for the Protection of Human Rights and Fundamental Freedoms. The judge read down sch.4 to the 2013 Act, which usually excludes same-sex couples when interpreting references to marriage in legal instructions drafted before the 2013 Act was in force, therefore removing its discriminatory effect and allowing it to comply with the 1998 Act.

    The Court also held there was no impediment to including same-sex spouses in the beneficial class (and that same-sex spouses should be included using traditional textual and contextual construction principles). This is an important decision for those considering the interpretation of older settlements
    and the impact of the human rights legislation upon them.

    Although the Court considered that to include stepchildren in the definition of ‘children’ would be overly onerous on the trustees, especially in the context of an employee benefit trust, it is nevertheless possible to include stepchildren as beneficiaries of a trust by ensuring, if relevant, that the definition of children expressly includes stepchildren or by including them by name.

    In an inheritance context, an obvious (but important) point to remember is that a successful challenge may result in a previous will being admitted to probate; or if there is no previous will, the intestacy rules being applied. This was evident in the recent case of Reeves v Drew and others, where the deceased’s son successfully convinced the Court to uphold his father’s earlier will.

    When referring to the deceased’s final will, the judge held that the deceased’s daughter had ‘pulled the wool’ over her father’s eyes and exploited his poor literacy and that the deceased had not understood the terms of his latest will at the date on which he signed it and had not intended to alter his testamentary dispositions so radically.

    Conversely, in the recent case of Wilson v Spence, the stepchildren successfully challenged their stepfather’s will, only to have their grant of letters of administration revoked as they had misrepresented their relationship to the deceased by claiming they were his children, as stepchildren do not inherit or have a right to administer an intestate estate.

    The recent 1975 Act case concerning the estate of Stewart Higgins shows a relatively modern application of the 1975 Act, which addressed the distinction between children and stepchildren. Higgins died intestate in 2017 and his stepson (the Claimant) claimed on the basis he had not been provided for under the intestacy rules. The Claimant, aged 45, had been nine years old when his mother married Higgins and he and his sister had remained close to Higgins until his death. Further, Higgins had supported the Claimant with his previous divorces and contributed financially towards his weddings. Higgins also promised the Claimant that he would be provided for under his wills, equalising a substantial gift Higgins had given to the Claimant’s sister during his lifetime.

    In reaching a decision, the Court considered the difficulties sometimes faced by adult children of the deceased making a 1975 Act claim, who usually require more than simply the qualifying relationship in order to successfully claim against their parent’s estate (stemming from the case of Re Coventry, and confirmed in Illot v Mitson). In the Claimant’s case, the Court confirmed that this applied equally to stepchildren and decided that ‘something more’ had indeed been demonstrated because:

    • Higgins had expressed that he wished to equalise matters as between the Claimant and his sister when it came to making a will; and
    • Higgins was close to the Claimant and vice versa, in contrast with the intestacy beneficiaries (seven relatively distant cousins), although Higgins did maintain some contact with them.

    The case provides some clarity for the category of 1975 Act claimants who are ‘treated as a child of the family’ and clarifies how the 1975 Act can be used to meet the needs of modern family structures. Although the position is arguably different for minor children and stepchildren, Higgins shows that adult stepchildren can be treated in a similar way to adult children under the 1975 Act. Perhaps, in due course, we will see whether the position would be different if it were necessary to balance a stepchild’s needs against those of a child.

    Conclusion

    Although the Report found that blended families were on the rise and that their complexity can lead to more conflict, one of the other key conclusions was that ‘communication and early planning is essential’. This is borne out by many of the examples above. In a family trust, children can be defined appropriately to the particular family; and if they are not, then cases such as PQ v RS9 confirm that the difficulties need not be insurmountable.

    Mind The Step: Understand your rights and obligations as a step-parent

    It is now finally accepted that there is no such thing as a “typical” family. Families comprised of step-children, half-siblings and non-biological parents – so-called “blended” families – are the norm for many across the country, including our clients.

    Yet despite step-parents being a common feature in modern families, their rights, obligations and legal relationship with the children of the family are often misunderstood. This is, not least, due to the confusing amalgam of legal and cultural language in our lexicon, and the often overlapping roles of biological and non-biological parents.

    Who is a “step-parent”?

    To be a child’s step-parent, an individual must be married to, or in a civil-partnership with, one of the child’s biological parents. Living with a child or their parent is not sufficient.

    However, acquiring step-parent status does not automatically bestow any rights or impose any obligations on an individual in respect of a child. Step-parents have no legal obligation to make financial contributions towards their step-child’s life, nor do they have Parental Responsibility (“PR”) for their step-children. This means that, in legal terms, step-parents do not have the rights, duties, powers or responsibilities that a parent has. In the absence of an agreement or court order to the contrary, therefore, a step-parent is in the same legal position as a parent’s unmarried partner.

    Of course, this does not negate the often significant bond between a step-parent and step-child, nor does it mean a step-parent cannot play an important part in their step-child’s upbringing. However, it can pose practical issues; for example, a step-parent has no legal right to be involved in decisions about a child’s schooling and medical treatment.

    Can a step-parent acquire Parental Responsibility?

    Should parents and their new spouses wish to formalise the role of the step-parent, there are a number of ways in which this can be achieved:

    1. Signing a Parental Responsibility Agreement. Entering into a Parental Responsibility Agreement with a child’s parent (or both parents, if more than one has PR) will give a step-parent PR for the child. This means they will have the same rights, responsibilities and authority as the child’s parent, and that they can, for example, be involved in decisions about the child’s health and education. Acquiring PR in this way will not extinguish anyone else’s PR for the child. It will, however, require the consent of both the child’s parents, which is not always easy to obtain.
    2. Obtaining a Parental Responsibility Order. If one of the people who already has PR declines to enter into a Parental Responsibility Agreement with a step-parent, the step-parent can apply to the court for PR. When considering an application, the court will consider the step-parent’s commitment to the child (including to their welfare and their maintenance), as well as the step-parent’s attachment to the child and their reasons for applying. This is a more complex route than signing a Parental Responsibility Agreement, as it will involve going to court. Every person with PR for the child must be named as a respondent to the application and will have an opportunity to oppose it.
    3. AdoptionThis is the most drastic route to obtain PR, as it will involve extinguishing the PR of the parent who is not married to, or in a civil partnership with, the applicant step-parent. It is only likely to be appropriate where the other parent has died, or where there is some other reason that they cannot play a meaningful role in the child’s life.

    Alternatively, a step-parent may consider that they have sufficient responsibility for their step-child under the powers delegated to them by their spouse. It is common for parents to delegate their PR informally for limited periods. For instance, a parent going abroad on holiday and leaving a child in the care of a step-parent is effectively delegating their PR to the step-parent for the time they are away, so that the step-parent can deal with the child’s school and GP. However, the parent would not expect the step-parent to enrol the child in a new school or arrange for them to have elective surgery without consultation. Such informal and limited delegation of PR is legislated for under sections 2(9) and 3(5) of the Children Act 1989. [1]

    Nevertheless, if a step-parent plays an active role in a child’s life, it is important that their spouse makes contingency plans to ensure the step-parent has their clear authority to make decisions in their absence. It can be sensible, if a step-parent will be left in charge of the child for a significant period, for the parent to write a letter addressed “to whom it may concern”, explaining that they have delegated their PR to the step-parent for a limited period and including their own contact details, and those of the other parent, if appropriate, in case of emergency.

    What happens if a parent dies?

    If a child’s parent dies, a surviving parent with PR will be assumed to be the person who should care for the child, even if they have not played an active role in the child’s life until that point. This is unless there is a Child Arrangements Order in force at the date of death, naming the deceased parent as the person with whom the child is to live. In this event, or where there is no surviving parent with PR, the child will be cared for by the person who is appointed guardian for the child in the deceased parent’s will.

    A parent who is concerned about the ability of the other parent to care for the child on their death should therefore take steps during their lifetime to obtain such a Child Arrangements Order or to formalise the step-parent’s role. If they are unable to do so, it can help for a parent to appoint the step-parent as guardian for the child in their will and prepare a letter of wishes setting out their concerns and their preference that the child is cared for by the step-parent in the event of their death. Whilst this appointment will not automatically take effect on the appointer’s death, and whilst a letter of wishes is not binding, such a letter and appointment can provide powerful evidence in court proceedings if a step-parent seeks to acquire PR after the appointer’s death.

    In the event that a guardianship takes effect, the guardian will automatically acquire PR for the child.

    What happens when a parent and step-parent separate?

    If a step-parent separates from a child’s parent, they will not have an automatic right to spend time with the child, even if they have acquired PR, unless they have adopted the child. PR acquired under a Parental Responsibility Agreement or a Parental Responsibility Order does not give a step-parent any automatic rights to see the child, nor does it make them liable to pay child maintenance.

    In this situation, a step-parent may wish to apply for a Child Arrangements Order to be named as the person with whom the child is to live, or a person with whom the child is to spend time. They may do so without the court’s permission if they are a step-parent (i.e., if at the time of the application they are still married to the child’s parent); if they have lived with the child for three years (and such period has not ended more than three months before the date of the application); if they have PR; or if they have the consent of all those with PR. All other persons must ask for the court’s permission to apply.

    When considering whether to grant a Child Arrangements Order, the court’s paramount consideration will be the welfare of the child in question. This is determined by the court taking into account a number of factors, including the child’s physical, emotional and educational needs, as well as their ascertainable wishes and feelings.

    There is a strong chance that a step-parent who can prove that they have an active, beneficial and long-standing relationship with their step-child will be granted contact under a Child Arrangements Order naming them as someone with whom the child is to spend time. Note that when making such an order, the court may grant a step-parent PR for the child, but this is not always the case. If the court goes further and makes a Child Arrangements Order naming a step-parent as the person with whom the child should live, they will automatically acquire PR.

    This is a complex area of law. Every step-parent’s relationship with, and rights in relation to, their step-children will be different. If you are considering formalising your role in your step-child’s life, you should seek specialist advice.

    If you would like further information about anything covered in this article, please contact our Family team. For advice on revising your will, appointing a guardian and preparing a letter of wishes, contact our Private Client team.


    [1] Under section 2(9) of the Children Act 1989 a person who has PR may arrange for some or all of their PR to be met by someone acting on their behalf. Under section 3(5) of the Children Act 1989 a person who has “care of the child” may do what is reasonable in all the circumstances for the purpose of safeguarding a child or promoting their welfare.

    Simon Blain
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    Decrypting Crypto: James Brockhurst to speak at the International Trust and Private Client Conference Jersey 2022

    Private Client Partner, James Brockhurst, has been invited to speak at the International Trust and Private Client Conference Jersey 2022.

    The conference, taking place on 9 June 2022, provides sessions tailored to tackle the estate and tax planning issues facing the Channel Islands, with a particular focus on new challenges including political uncertainty, digital disruption and regulatory restraints.

    James will present the session ‘Decrypting Crypto for the Private Client’ at 16:30, alongside Jonathan Colclough of BDB Pitmans and Gilead Cooper QC of Wilberforce Chambers.

    You can register to attend here.

    James Brockhurst
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    A guide for British Expats in Singapore: Estate & Wealth Planning Post-Divorce

    Your divorce is now final. What next? The last thing on your mind may be to consider your estate and wealth planning, and the prospect of dealing with lawyers again so soon after your divorce can quite understandably be unappealing for some!

    However, there is a good chance that your existing planning arrangements (if any) are no longer appropriate for your post-divorce circumstances. They may be overly reliant on your ex-spouse, or too intertwined with their planning and not reflective of your individual wishes. Perhaps they do not cater for any post-divorce obligations you may owe to your ex-spouse or are wholly inadequate for the significant windfall you received from them.

    Doing nothing or waiting too long to redress these sorts of issues may lead to serious and unintended consequences that could adversely affect any or all of your children and the rest of your immediate family in the event of your death or loss of mental capacity. Now is therefore the most critical and opportune time to start afresh with your estate and wealth planning and give yourself peace of mind after going through such a major life event.

    This article serves to highlight the key areas of planning to consider, which are equally applicable to either party to a divorce and to British expats residing in jurisdictions other than Singapore. UK tax considerations in a divorce scenario are also critical given that estate planning and tax (particularly UK inheritance tax if a person is UK domiciled) go hand-in-hand and cannot be compartmentalised. Further details of such considerations can be found here but suffice to say tax advice should always be sought when embarking on any aspect of estate and wealth planning.

    Please note that references in this article to England or English law should be understood to also include Wales but not Scotland and Northern Ireland whose laws differ to that of England and Wales.

    The first step – review your estate

    Your estate may have significantly changed as a result of the dissolution of your marriage. Therefore, the best starting point is to review it, and prepare a general inventory of your current worldwide assets and liabilities.

    Not only will this help to identify what is in your estate, but it will also focus your mind on your succession objectives and help to establish your thoughts on important issues, such as:

    • any particular wishes you have regarding the devolution of specific assets;
    • assets of sufficiently high value that require bespoke succession arrangements;
    • how to deal effectively with any digital assets or cryptocurrency you own;
    • any family inheritance you are due to receive; and
    • liabilities (particularly any owed to your ex-spouse pursuant to the divorce) and how they may need to be dealt with following your death.

    Such a review should also establish if you have a life insurance policy or pension (either privately or through your employment in Singapore or elsewhere) and whether pay-outs to nominated beneficiaries require updating if you had previously nominated your ex-spouse.

    Cross-border estates

    Living in Singapore, you may have an international lifestyle and perhaps own assets located in multiple jurisdictions. You may even have acquired a foreign asset from your ex-spouse as part of the divorce settlement.

    In these circumstances, you have a cross-border estate, which will add a level of complexity to your wealth and succession planning if ‘conflict of law’ issues arise. Broadly, conflicts may arise between the laws of different countries when determining which law should ultimately govern the succession of your assets at death. To resolve such conflicts, countries have developed domestic ‘private international law’ rules to determine which law should apply in different circumstances. This is a particularly complicated area of law and beyond the scope of this article, so formal legal advice should be sought if such rules may be relevant to you.

    As a general overview, if you are domiciled in England at the time of your death, then English private international law rules will apply to the succession of your estate. Having British nationality and a British passport does not automatically mean you have a domicile within one of the countries of the UK. The concept of ‘domicile’ under English law is rather nebulous and made up of a variety of relevant factors that seek to draw out a person’s strength of connections to a particular jurisdiction and their current and future intentions. It is important to bear in mind that domicile can differ for succession purposes and UK taxation purposes.

    If you have an English domicile, the general rule is that ‘moveable’ assets (e.g. paintings, jewellery, shares etc.) devolve in accordance with English law, whereas the succession of ‘immoveable’ assets (e.g. real estate) is governed by the local laws in which the asset is situated. Under English law, a person generally has complete testamentary freedom to dispose of their entire estate on death provided they have a valid and effective English Will in place. This widely contrasts with the rules in civil law jurisdictions (such as countries in Europe) where a system of ‘forced heirship’ operates which dictate that a certain portion of a person’s estate must devolve to certain family members in prescribed percentages and cannot be altered by a Will.

    A situation could occur where your English Will governs the succession of your worldwide estate, but it does not when it comes to your holiday home in France, for example. The EU Succession Regulations were introduced in 2015 to avoid these types of situations and harmonise succession laws for cross-border estates involving EU countries by enabling a person to choose whether the law applicable to their whole estate wherever situate and whether moveable or immoveable should be that of either their habitual residence at the time of their death (the default position) or their nationality, which must be elected in a Will to override the default position. Therefore, if you own real estate in an EU country, you have the option to elect in your Will that English law governs the succession of that property on the basis of your British nationality. Brexit has had no impact on your ability to make such an election.

    Nonetheless, this only applies to assets situated in EU countries. Conflict of law issues will still exist if you own assets in other civil law countries with forced heirship such as Vietnam, the Philippines and Japan. Careful planning will be necessary for such assets, particularly if they are valuable

    Wills

    Both England and Singapore are common law jurisdictions and therefore provide for testamentary freedom facilitated by a valid and effective Will. If a person dies without one, then the relevant intestacy rules will apply to the succession of their estate. Such rules dictate who can inherit from the estate and in what manner, which are likely to be contrary to the deceased’s wishes. To avoid this situation occurring, it is vital that a person has a Will regardless of their circumstances.

    Being newly divorced, it is critical that you update your Will if you have one already. For example, it may leave everything to your ex-spouse and appoint them as an executor of your estate, which is a common and appropriate arrangement for married couples but not for divorcees.

    If you are domiciled in England and have an existing English Will, divorce does not revoke it. Your ex-spouse is treated as if they had died at the date of the decree absolute. This could inadvertently result in an intestacy situation if your existing Will leaves everything to your ex-spouse but is silent on what should happen in the event of their death. Problems can also arise if your ex-spouse is named as the sole appointed executor and trustee in your existing Will and fails to appoint substitute executors and trustees in the event of their death.

    If you are not domiciled in England, then your Will could create a discretionary trust over your estate for the benefit of your children (but not for your ex-spouse). This may be very useful in long term tax planning for any of your children (and successive generations) who may live in the UK in the future and therefore have a UK domicile; it avoids your assets and wealth your children may not immediately need from falling into their own individual estates for UK inheritance tax purposes.

    Minor children

    If you have minor children, an important question will be: who should be their guardian(s) if both you and your ex-spouse pass away while they are still minors? This can be a tricky and highly emotive issue but if you and your ex-spouse are able to agree on a guardian in this scenario it is best to record this in a separate document signed by you both rather than leaving it to be stated in your respective Wills (which is common practice), one of which could be changed without the other’s involvement or knowledge.

    Another important consideration is that if your ex-spouse does become your children’s sole guardian following your death, they could have absolute control over any wealth your children inherit directly from your estate until they reach 18 years old. Any risk that your ex-spouse may abuse their position and enrich themselves from your wealth may be mitigated if under the terms of your Will, you create a trust over it for the benefit of your children to be managed and controlled by independent trustees appointed in your Will.

    Lifetime trusts

    Singapore has a thriving and robust professional trusts and fiduciary services industry and a modern trust law. If your estate is of significant value with surplus wealth, you might wish to create a discretionary trust during your lifetime as part of your estate planning. A discretionary trust is so-called because it is made by the ‘settlor’ (you) in favour of a class of potential beneficiaries (for example your children and immediate family). The appointed trustee(s) have absolute discretion to determine how much (if anything), when and in what manner potential beneficiaries receive funds from the trust.

    Discretionary trusts are flexible and enable the trustees to take into account the changing circumstances of the beneficiaries. It is usual for the settlor to write a non-legally binding letter of wishes to the trustee(s) to provide guidance on how the trustee(s) should consider exercising their discretion and manage the trust. This is a flexible mechanism, as a letter of wishes can be changed from time to time without any legal formality.

    Holding assets through a trust structure can be advantageous for a number of reasons:

    • it allows you to plan for the succession of assets for the benefit of future generations of your family;
    • it avoids the need to go through the probate process on death for assets held in the trust;
    • it may assist with asset protection and tax planning for your family; and
    • it may help in family governance or business succession planning.

    Trusts are not appropriate in every case for particular reasons. For example:

    • a core feature of a trust is that the settlor gives up a significant degree of control over the trust assets, which some may not find comfortable (although there may be ways to mitigate this to some extent);
    • the creation of a trust is likely to give rise to UK inheritance tax consequences if you are UK domiciled (or deemed to be so domiciled for tax purposes), or if you are non-UK domiciled but transfer UK assets (or non-UK companies owning UK residential property) into a trust; and
    • other rules regarding the UK taxation of offshore trusts may apply if beneficiaries of the trust are UK tax resident (for example, children being educated in the UK) or you plan to relocate to the UK in the future. These rules can be complex, and you may decide that the cost and effort of navigating the complexities is disproportionate to the non-tax advantages of a trust.

    Incapacity planning

    A growing feature of estate planning is to ensure arrangements are in place to deal with the eventuality of a person becoming mentally incapable. Given your connections to the UK and Singapore, you may have created Lasting Powers of Attorney (LPAs) in each jurisdiction already, whereby you appoint someone as your attorney to make decisions on your behalf regarding the management of your personal affairs if you lose mental capacity.

    There are two forms of LPA available in England, one relating to property and financial affairs, and the other dealing with health and personal welfare. During your marriage, you may have created one or both types of LPA, and perhaps appointed your ex-spouse as an attorney. Your divorce will have had the effect of terminating their appointment, which could have the wider knock-on effect of terminating the LPAs entirely depending on how attorneys are appointed. For this reason, it is advisable to review and update your existing English LPAs following your divorce. This is also advisable if you have an LPA in Singapore or its equivalent in any other jurisdiction where you have assets.

    The article was first published on 25 April 2022 by Expatriate Law as part of their ‘Guide to British Expats in Singapore’ e-book.

    Alfred Liu
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    The Green Unknown: might Conservation Covenants transform the English countryside?

    Conservation Covenants (“CCs”) will allow landowners and developers to deliver “public money for public goods” through large-scale Environmental Land Management Schemes, tap into emerging private natural capital markets and discharge Biodiversity Net Gain obligations. If they are really to take off, the Government needs to align the tax regime with these environmental incentives.


    Download this briefing in PDF format


    CCs are a quietly radical innovation with the potential to revolutionize the way English and Welsh land is owned and managed. Introduced in the recent Environment Act and inspired by similar concepts in other countries, CCs will allow landowners to contract voluntarily with a “Responsible Body” to commit their land to “conservation”. They will be new “statutory burdens on land”, a unique and interesting mixture of new and existing legal instruments.

    Tying up land long-term, perhaps even indefinitely, in such a specific way is a dramatic step and we will see how popular they become. Rural landowners will be expected to provide land for conservation and to meet Biodiversity Net Gain (“BNG”) and other targets, so CCs will be particularly relevant to them. Moreover, sustainability is now so embedded in the national consciousness that, soon, every development will have a conservation element, even if only to offset or outsource its obligations, and particularly to provide the BNG required for planning permissions.

    In this article, we try and answer the following questions:

    1. What are CCs?;
    2. How will CCs work?; and
    3. Why would a landowner want to enter into a CC?

    Fields

    1. What are CCs?

    1.1 Context

    CCs have been part of the conservation conversation for some time. The Law Commission published a report in 2014 and the Government carried out a consultation in 2019. They also exist, in various forms, in other jurisdictions including Scotland, New Zealand, USA and Australia. England and Wales formally introduced them in the Environment Act, which received royal assent on 9 November 2021. CCs will come into being on 30 September 2022.

    1.2 The legislation

    Part 7 of the Environment Act is the Big Bang for CCs in England and Wales. There are two main elements. A landowner must contract:

    1. with a “Responsible Body”; and
    2. to use the land for a “conservation purpose”.

    1.3 What is a Responsible Body (“RB”)?

    RBs must be approved by the Government and have some kind of conservation purpose. They will be responsible for enforcing the landowner’s obligations, but it can be either the RB or the landowner who actually carries out the conservation work. Both the landowner and the RB can enforce against one another like parties in a conventional contract (RBs will not be arms of the state).

    It seems likely that RBs will principally be large, national charities like the National Trust or the RSPB, but they could also be local (even community) bodies set up specifically for small-scale projects. They will not receive any public funding for administering CCs. At this stage, various questions arise:

    1. Will RBs be mainly existing bodies or new ones set up specifically to enter CCs?
    2. Will RBs be primarily national or local? (Even specific to particular CCs?)
    3. Will RBs be primarily mass-membership organisations like the National Trust, or private bodies like charitable trusts established by landowners?
    4. Where will RBs find the resources to carry out their obligations under CCs?
    5. Will RBs want public access to land within CCs (including to pay for them)?

    1.4 What is a “conservation purpose”?

    A conservation purpose must be intended to be for the public good and:

    1. to conserve the natural environment of land or the natural resources of land; or
    2. to conserve land as a place of archaeological, architectural, artistic, cultural or historic interest; or
    3. to conserve the setting of land with a natural environment or natural resources or which is a place of archaeological, architectural, artistic, cultural or historic interest.

    It is so widely drawn that, arguably, pretty much any land might have a conservation purpose. The Government and Law Commission emphasize that the “public good” should be interpreted in the widest sense. It will be interesting to see how creatively this is interpreted. Ultimately, if challenged, the courts will decide whether a CC is valid or not, although sensible agreements will contain dispute resolution provisions.

    1.5 CC legal foundations

    CCs combine elements of:

    1. ordinary covenants, requiring the landowner to do or not do certain things on the land;
    2. special National Trust and Forestry Commission covenants, as RBs will be able to enforce them without owning adjoining land; and
    3. section 106 planning agreements, as CCs will appear on the Land Charges Register rather than the property’s title.

    The really novel feature is that CCs can impose positive (as well as negative) obligations on a landowner’s successors.

    Fields

    2. How will CCs work?

    Only when they come into force will we see how CCs work in practice. Meanwhile, the Environment Act give a sense of their shape:

    2.1 Tenants

    Whether a tenant can enter a CC without landlord’s consent is a grey area. Consequently, it will be in both parties’ interests for a tenant to seek landlord’s approval before entering into a CC.

    The Government is keen for tenants to enter into CCs; there is no landlord consent requirement in the legislation. However, if the CC involves the tenant significantly altering their holding or farming practice, consent could be required.

    Several commercial points flow from a tenant entering a CC. It could affect the rent review by enhancing or diminishing the land value. Who will own / have the benefit of any enhancement to the land arising from the CC? The tenant might seek compensation for any improvement to the value of the land. The landlord might argue that the CC has diminished the value of the land and seek damages. If a tenant CC prevents the landlord from developing the land then the diminution in value could be substantial. As with consent for alterations, the licence for consent should provide explicitly for these issues to avoid dispute later. In new leases, landlords should include a requirement for such a licence if a tenant wants to enter into a CC.

    The legislation says anyone who owns land freehold or has a lease of more than seven years (no matter how much has expired) can enter into a CC. This poses problems for Agricultural Holdings Act (“AHA“) tenants. Although AHA tenants have high security of tenure and are long-term occupiers, AHA tenancies run year to year. Unless the Government clarifies or changes the legislation, AHA tenants may be excluded from CCs on this ground.

    2.2 Duration

    As noted above, CCs will bind the landowner’s successors in title. CCs can be indefinite but sensible landowners will agree a specific period with the RB . They will need to last for at least 30 years to secure Biodiversity Net Gain, which we cover below. For tenants, they will last until the end of the term. Significantly, if a tenancy is terminated early, (one year into a hundred-year term, for example) the CC would carry on for the remaining years and bind the landlord – another reason for landlords to insist the tenant seek their consent. Licences for consent should include protection against losses flowing from a tenant’s default, such as security over a deposit account.

    2.3 Enforcement

    Punishments for breaching CCs are the usual suspects: orders for specific performance of obligations; injunctions; damages; orders for payment of amounts due. The court will consider the public interest in choosing a remedy and could award exemplary / punitive damages against a landowner in excess of actual damage caused. The limitation period will be six years from the date of the breach, although as most breaches will be ongoing this could be elastic. Landowners will be able to use factors beyond their control and emergencies as defences. As CCs are private, contractual agreements there will be no criminal sanctions.

    2.4 Discharge or modification

    The landowner and RB can agree to modify or discharge a CC, though any modifications will still need to meet the “conservation purpose” criteria. Either party can also apply to the Upper Tribunal to modify or discharge CCs where reasonable, but the Upper Tribunal will not be able to take account of a change in a party’s circumstances making a CC unaffordable for that person, so long term cashflow will obviously need to be considered when entering a CC.

    In practice, ongoing dialogue between a landowner and RB will be important, particularly in the early days. Parties should also agree a timeframe for reviewing a CC formally, say every two years.

    Fields

    3. Why would a landowner want to enter into a CC?

    Time will tell how popular CCs are. The starting point is that CCs will restrict a landowner’s agency over their land and, therefore, devalue it, potentially substantially, depending on the opportunity cost. What’s more, there is no direct public funding so CCs will need to align with other revenue schemes.

    3.1 Altruism / environmental reasons

    The environmental movement is now so strong that many people are keen to do and be seen to do “the right thing” for the planet. CCs are one way of achieving this. As discussed, CCs’ “conservation purpose” is broad and could have wide appeal to protect specific things that people or companies want to preserve or enhance, whether in their lifetime or as a legacy. The point when land is transacted – whether sold, leased, or left or gifted to a family member – is a logical moment to enter into a CC. Even if environmental conscience is not the sole reason it will often be a factor in decision making alongside other considerations.

    3.2 BNG

    Every development requiring planning consent will need to show 10% BNG), another Environment Act innovation. So there is going to be a lot of BNG around; CCs will be one way of providing it as developers and builders will have the choice between CCs and planning obligations (typically delivered under section 106 agreements with local authorities). There will be a register of land on which BNG requirements are secured by CCs or planning obligations, but we do not yet know how detailed it will be. The main difference between CCs and section 106 agreements is enforcement; the latter will be enforced by the local authority whereas the former will be subject to an RB. Initially, developers will likely stick with the devil they know (section 106 agreements), but they could switch to CCs if they perceive them to be more flexible, more bespoke, more straightforward to agree and cheaper than section 106 agreements. Cynically, you might expect RBs (because of the uncertainty of their resources) to be less rigorous enforcers than local authorities.

    3.3 Natural Capital Agreements

    Natural capital agreements are where a landowner contracts with a third party to provide an environmental service, like carbon sequestration or tree planting. They are relatively new but likely to become popular as governments, companies and individuals take steps to reduce their carbon footprint and environmental impact. Currently, they take the form of leases or service contracts. CCs could be a way to secure and enforce the environmental obligations within natural capital agreements, like a charge or a restriction on a property’s title to protect an overage agreement or other obligation. They could also tie into the Environmental Land Management Schemes (“ELMS”) we cover below.

    3.4 Tax incentives

    Tax is the elephant in the forest here. At the moment there are no tax incentives for CCs – the Government wants CCs (and indeed all natural capital arrangements) to be primarily private sector funded. But that could change if it wants to promote them and join up incentives for landowners. In other countries there seems to have been major take up only where there is a tax incentive (the USA is world-leader here, with federal income tax deductions and state tax credits). Agricultural subsidy reform may push landowners towards more sustainable management, but this does not align with the tax regime yet; notably inheritance tax with its traditional definitions of agriculture for Agricultural Property Relief and business for Business Property Relief. Without a change in the law, entering land into environmental schemes and pursuing less conventional farming will jeopardize both reliefs. This is a key policy focus in the rural world.

    3.5 Environmental Land Management Schemes (ELMS)

    CCs are well-suited to Landscape Recovery Schemes (“LR Schemes”). LR Schemes are the largest, most ambitious ELMS component, intended for landowners who (according to DEFRA) want to “take a more radical and large-scale approach to producing environmental and climate goods on their land”, they will operate over 500 to 5,000 hectares and are expected to last for at least 20 years. Most LR Schemes will require co-operation by groups of landowners, which is where CCs come in. DEFRA suggests CCs could be used to secure agreement between landowners and secure the LR Schemes, as with natural capital agreements.

    Applications for pilot LR Schemes opened on 1 February 2022 and up to fifteen will be chosen in the summer of 2022. Like CCs, LR Schemes are yet to come into force. This is a space worth watching. We do not know how much money will be available for LR Schemes. Each will be bespoke, and the Government says they must secure private as well as public funding. Indeed, LR Schemes are intended to help landowners access the growing market for natural capital services like carbon sequestration and to develop standards and rules for those markets.

    While some landowners will go the full Knepp and rewild, most will want to ensure that land in LR Schemes can still be farmed commercially (including to qualify for inheritance tax reliefs). Therefore, those negotiating and drafting CCs should take care that they are not too restrictive of farming and other activities. And, as suggested above, well-drafted CCs will include a review mechanism. On the ground, this will be complex, particularly as LR Schemes will probably involve several landowners.

    Conclusion

    Farming and landowning in the UK are in a period of regulatory and economic uncertainty. If the Government wants farmers to deliver public goods (as well as food security), it needs to ensure ELMS provides sufficient public money. It also needs to reform tax reliefs to reward conservation. CCs are potentially a good means by which landowners can deliver conservation – especially on a large scale with ELMS – but on their own they are not enough.

    Fields

    Polly Montoneri
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    Dickon Ceadel, Hannah Mantle and Maryam Oghanna to speak at the Transcontinental Trusts Geneva 2022

    Family Senior Associate, Dickon Ceadel, and Contentious Trusts and Estates Senior Associates, Hannah Mantle and Maryam Oghanna, have been invited to present at the 36th Annual Transcontinental Trusts Geneva 2022, hosted by Informa Connect.

    The annual three day event will be taking place from 18 – 20 May 2022.

    On 18 May at 9:40am, Maryam is hosting a session on Sham Trusts with Rachael Reynolds QC of Ogier.

    Dickon will be co-presenting the session ‘Stress in the Legal and Trust Workplace’ on 20 May at 12:10pm, alongside Katharine Landells of Withers and Annmarie Carvalho of The Carvalho Consultancy.

    Hannah will be joining the panel discussion on Letters of Wishes at 2:45pm, with Jordan Holland of 5 Stone Buildings.

    You can find out more about the conference here.

    Dickon Ceadel
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    Crypto And Trusts: The Tortoises In The Race – James Brockhurst writes for IFC Review

    Private Client Partner, James Brockhurst, has authored on article for IFC Review entitled ‘Crypto And Trusts: The Tortoises In The Race’.

    Blockchain technology has opened up huge entrepreneurial opportunities that a great number of industries have been quick to exploit. The trust industry, on the other hand, is naturally (and with good reason) circumspect about all things blockchain. But perceptions within the industry are rapidly changing.

    As such, trustees are therefore now grappling, in some cases urgently, with the challenges of holding cryptoassets in trust. In his article, James highlights the core issues that trustees are facing:

    • Indirect (Fund) Investment
    • Custody Of Cryptoassets
    • Investment Considerations
    • Compliance.

    The full article can be read here.

    James Brockhurst
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    Crypto in Disputes: James Brockhurst to present at the ThoughtLeaders4 Conference

    Private Client Partner, James Brockhurst, has been invited to speak at the ThoughtLeaders4 Conference ‘Crypto in Disputes’ in London.

    Crypto is increasingly prevalent in many areas of law and the resulting disputes involving Crypto are unique.

    The conference, taking place on 29 June 2022, will join together industry experts to address the areas of disputes where Crypto is involved, including:

    • NFT Disputes
    • Investing in Crypto Companies
    • ADR
    • International Regulation
    • Asset Recovery
    • Trusts
    • Divorce
    • Private Client matters.

    Forsters’ Crypto law specialist, James, will present the session ‘Trusts, Divorce & Private Client’ alongside Natasha Stourton and Natasha Oakshett of Withers and Andrzej Bojarski of The 36 Group. The session will cover inheritance, beneficial ownership, tax and divorce.

    You can register to attend here.

    James Brockhurst
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    Roberta Harvey to speak at ThoughtLeaders4 Contentious Circle of Trusts event

    Head of Contentious Trusts and Estates, Roberta Harvey, has been invited to facilitate a session on ‘Diminishing capacity of power holders’ hosted by ThoughtLeaders4 with Jordan Holland of 5 Stone Buildings.

    In the session, Roberta and Jordan will discuss disputes in relation to incapacitated persons’ assets from a multi-jurisdictional perspective.

    The event will take place from the 28 -29 April at Down Hall Hotel, Bishop’s Stortford.

    Roberta is delighted to be attending the event with Consultant, Alison Meek who will join Forsters’ Contentious Trust and Estates team (link to press release) on 3 May 2022.

    Roberta Harvey
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    Jo Edwards and Amanda Sandys write for Law In Sport on how to protect athletes when a relationship breaks down

    Head of Family, Jo Edwards, and Family Counsel, Amanda Sandys, have authored an article for Law In Sport entitled ‘Staying On Track: How To Protect Athletes From The Impact Of Family Breakdown’.

    The impact of relationship difficulties or breakdown on the well-being of sports professionals is often overlooked. It can take a significant toll on mental health and, in turn, professional performance, unless carefully managed by agents and those around them.

    In their article, Jo and Amanda examine the practical issues for athletes and support teams to be aware of when forming relationships and managing relationship breakdown. Specifically, it looks at:

    • Awareness of the mental impact
    • Addressing media intrusion
    • Dealing with disputes
      • Legal frameworks for different types of relationship
      • Relationship agreements and nuptial agreements
      • Protecting finances and assets
      • Ongoing maintenance obligations
      • Choosing a favourable jurisdiction
      • Children – parenting arrangements
      • Geographical considerations
      • Alternatives to court

    The full article can be read here, behind the paywall.

    Jo and Amanda have acquired quite extensive experience in this field, especially with footballers, and always enjoy working with sports psychologists and reputation management professionals to get the best outcomes for their clients. If you have questions in relation to the topics raised in this article or other family matters, please do get in touch.

    Death in the Modern Age conference: Hannah Mantle to speak on Conflict of Laws and multi-jurisdictional claims

    Contentious Trusts and Estates Senior Associate, Hannah Mantle, will be speaking at the ThoughtLeaders4 Private Client conference, Death in the Modern Age: UK & Cross-border probate, wills, and trusts on 26 April 2022.

    Hannah will be joined by Prof Jonathan Harris QC (Hon.) (Serle Court) and Aurélie Conrad Hari (Bär & Karrer) to speak on ‘Conflict of Laws and multi-jurisdictional claims’.

    The event will explore the latest challenges and issues in Wills and Probate in the modern digital age and will include informative panel discussions, interactive workshops and seminars hosted by industry experts.

    To find out more and to book a place at the conference, taking place at the Ironmongers’ Hall, London please click here.

    Decrypting Crypto for the Private Client: James Brockhurst to present at the Dubai Informa Connect Conference

    Private Client Partner, James Brockhurst, has been invited to present a session at the Informa Connect Conference ‘Cross Border Planning: The Next Generation’ in Dubai.

    The conference programme focusses on unpacking the key issues facing internationally mobile private clients. International practitioners will discuss a vast range of matters around immigration, structuring, litigation, family governance and investment management.

    James will join Emma Heelis-Adams of Burges Salmon on Thursday 12 May at 14:00 GST to present the session entitled ‘Decrypting Crypto for the Private Client’. Amongst other things, James will talk about the most topical crypto work we are undertaking for clients.

    You can register to attend here.

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    James Brockhurst

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    Roberta Harvey and Emily Exton to co-host Fresh Perspectives Contentious Trusts Conference

    Head of Contentious Trusts and Estates, Roberta Harvey, and Managing Partner, Emily Exton, are co-hosting the fourth Fresh Perspectives Contentious Trusts Conference on May 15 – 16 at W Barcelona.

    After two years of postponements, the conference will bring together leading solicitors, barristers, offshore lawyers and trust practitioners.

    Emily and Roberta will be hosting alongside Andreas Zavos (Boodle Hatfield), Maxine Mossman (Clifford Chance), Jenny McKoewn (Stephenson Hardwood), Helena Berman (Stephenson Harwood) and Emma Jordan (Taylor Wessing).

    Please follow the conference page on LinkedIn for further details.

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    Art, Death & Legacy: Forsters and Artistate host panel discussion at the London Art Fair

    Catherine Hill, who heads Forsters’ Art Group, will be one of three keynote speakers in ‘Art, Death & Legacy: Managing artists’ estates in the 21st century’ at the London Art Fair.

    “Running an artist’s estate is a complex business. The logistics of storage, archiving and insurance, the administration of loans, consignments and other contractual issues, copyright and Artist Resale Rights, curatorial decision-making and reputation management – the range of skills and knowledge required is very broad. This all plays out against the backdrop of providing for the artist’s surviving family whilst at the same time ensuring that the right body of work remains in the public eye for years to come. Addressing all these issues needs specialist help at different points along the way. Knowing who to speak to and when is key”.

    In this panel discussion, Catherine Hill, a co-founder of Artistate, will be joined by guest speakers Sam Mundy (British painter) and Matthew Travers (Director of Piano Nobile Gallery) to draw on their experiences of working with and running artist estates and explore what measures artists can take to prepare their own legacy.

    The session, moderated by Artistate’s Jessica Carlisle, will take place on Thursday 21 April 2022 at 1pm and you can book a ticket here.

    Forsters’ Art Group are also delighted to be one of the sponsors of the fair. If you are attending the fair and would like to connect with a member of our team, please contact [email protected].

    Catherine Hill
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    Catherine Hill

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    Championing the eclectic Modern and Contemporary Art scene – Forsters sponsors this year’s London Art Fair

    Forsters’ Art Group are delighted to be sponsoring the London Art Fair’s Preview Evening on Wednesday 20 April and look forward to meeting seasoned and aspiring collectors, gallery owners and artists at the launch event.

    The London Art Fair, which is returning to the capital this Spring from 20 to 24 April 2022, features over 100 selected galleries celebrating the best in modern and contemporary art to discover and buy. From prints and editions, to major works by renowned artists from the 20th century to today; the Fair nurtures collecting at all levels, providing expert insight through an inspiring programme of talks, tours and curated exhibitions.

    Catherine Hill, who heads Forsters’ Art Group, will be attending the preview evening alongside our specialist team of art lawyers who regularly advise on the legal practicalities of acquiring, owning and creating art. Catherine comments: “We are looking forward to sponsoring the London Art Fair’s Preview Evening, a highlight in the capital’s art calendar. It’s a great opportunity to champion the thriving modern and contemporary art scene and to support those collecting and selling art.”

    Catherine will also be taking part in the fair’s programme of talks as one of three keynote speakers in the panel discussion ‘Art, Death & Legacy: Managing artist estates in the 21st century’ on 21 April at 1pm.

    If you are attending the fair and would like to connect with a member of our team, please contact [email protected].

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    Catherine Hill

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    The biggest shake-up of divorce in 50 years: Jo Edwards quoted in The Guardian on no fault divorce

    Head of Family, Jo Edwards, has been quoted in The Guardian (4 April 2022) on the advent of no fault divorce, which will become law on 6 April. Under the new legislation, either or both parties to the marriage may apply to the court for an order which dissolves the marriage on the ground that it has broken down irretrievably.

    In the article, entitled ‘Surge in divorces expected as England and Wales introduce no-fault process this week’, Jo explains an increase in divorce cases is to be expected – “the experience of other countries where they’ve moved to a no-fault system is that there is a spike when the new law comes in – in Scotland, for example, when they changed the law in 2006”.

    Faced with a question on whether this will add undue pressure on the courts, Jo highlights that “in the medium to longer term the change would probably reduce the burden on the courts because cases would require less judicial oversight, as there would be no ground for a spouse to contest the divorce”.

    The full article can be read here.


    Jo has been at the forefront in campaigning for the no fault divorce law reform. She is an avid pioneer in finding less confrontational routes to resolving issues arising on divorce or separation and has dedicated much of her career to championing the modernisation of family law in England and Wales.

    To find out more please do get in touch with one of our Family lawyers or listen to our Breaking Good podcast episode “No Fault Divorce – ending the blame game”.

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